AT&T’s WarnerMedia and Discovery, Inc. are joining forces through the creation of a new single company. The standalone company will combine the wealth of entertainment and news content owned by WarnerMedia, including HBO Max, along with the wealth of nonfiction content owned by Discovery, including Discovery+, creating a much larger and more powerful entertainment business.
AT&T is no stranger to major mergers and purchases. In addition to DirecTV, AT&T also announced it was acquiring Time Warner in 2016 with the purchase completing in 2018. That deal ultimately resulted in the creation of WarnerMedia and eventually led to the release of the expanded Max version of HBO.
AT&T has now effectively announced it is spinning off WarnerMedia into its own company. However, it won’t be going it totally alone since Discovery is also on board. In a joint announcement, both companies confirmed that AT&T shareholders will own 71-percent of the new standalone company while Discovery shareholders will own the remaining 29-percent.
As to be expected with a deal of this size, the merger will be subject to regulatory approval, with both companies expecting the deal to close mid-way through next year. Once complete, the new standalone company will act independently of AT&T and is likely to result in a major force within the direct-to-consumer streaming market.
Why WarnerMedia and Discovery are joining forces
When AT&T first announced its intention to take over Time Warner, the goal was to create a mega company that controlled everything from the initial connection to the actual content being watched in homes and on phones. However, that goal now seems to have changed. Essentially, AT&T confirmed that it is creating two distinct companies. The first is the existing AT&T which will continue to focus on connectivity. The second will be a separate media-focused company which will look to strengthen its position within the streaming market with Discovery’s help
WarnerMedia owns HBO Max and Discovery owns Discovery+. Both of these are newer streaming services and ones that are trying to compete in a very busy market where consumers are feeling the pressure to limit how many subscriptions they have. Through the combining of the two companies and their related services, both will gain additional market strength in the direct-to-consumer market. Putting both in an even better position to take on the likes of Netflix and Disney.
Source: AT&T
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