Tech UPTechnologyWarnerMedia and Discovery will merge and create a streaming...

WarnerMedia and Discovery will merge and create a streaming giant

The giant result of the union could compete with streaming platforms such as Netflix and Disney +.

The US telecommunications giant AT&T announced on Monday the merger of its subsidiary WarnerMedia, which owns CNN and HBO, with the Discovery group, creating a giant that could compete with streaming platforms such as Netflix and Disney +.

When the deal is finalized, AT&T will receive $ 43 billion and its shareholders will have 71% of the new company, while Discovery shareholders will have 29%.

In a joint statement, the merger was described as the creation of “one of the biggest global players in streaming.”

The deal combines “WarnerMedia’s premium entertainment, sports and news products, with Discovery’s leadership in international and non-fiction entertainment, as well as its sports businesses, to create a leading, autonomous global entertainment company,” said the release.

The merger will create a competitor to market leaders Netflix and Disney +, as well as Amazon Prime Video and Apple TV, which have seen their subscriber numbers increase during the pandemic.

However, a slowdown in the growth of Disney’s online streaming platform between January and March caused some investors to worry and the group’s shares fell last week.

The name of the new entity will be revealed “in the next few days or next week,” said David Zaslav, current president of Discovery, who will lead the new company, in an interview with the US network CNBC.

Initially well received on the New York Stock Exchange, the transaction gave way to some skepticism: AT&T was up just a modest 1.78% and Discovery was down 2.22% around 3:30 PM GMT.

AT&T bought Time Warner in 2018 and later rebranded it WarnerMedia. It owns HBO, Warner Bros. studios, and cable channels such as the news network CNN.

Discovery has channels in more than 220 countries, according to its website.

New model

Faced with a new economic model, without advertising and with monthly subscriptions, several groups seek to strengthen their offer to maintain their stature in a market as competitive as that of entertainment in the United States.

AT&T, the first cable operator in the United States and second mobile operator, launched its own streaming platform HBO MAX in 2020 and Discovery its own, Discovery +, at the beginning of the year.

“The new company will be able to invest more in original content for its streaming services, improve programming options on its pay television channels (…) and offer more innovative video experiences as well as more options to viewers,” highlighted the two groups in Monday’s statement.

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HBO MAX had 61 million subscribers at the end of 2020 and Discovery + had 15 million at the end of April, while Netflix had 204 million and the Disney platforms (Disney +, ESPN +, Hulu) 146 million.

The projected turnover for the new giant is about $ 52 billion by 2023. The merger project foresees savings from synergies of about $ 3 billion annually.

For Richard Greenfield, an analyst at Lightshed Partners, “in today’s media environment, you have to be large enough in a specific market to be both large enough and agile enough to adapt to technological changes and achieve significant space in a landscape. dominated by platforms ”, as expressed in a blog post.

AT&T had already sold the streaming platform specializing in Japanese animation series Crunchyroll to Sony at the end of 2020 and announced in February that it was transferring part of DirectTV to the investment firm TPG.

The merger with Discovery will allow AT&T, with a debt of 169,000 million dollars at the end of March mainly due to numerous acquisitions in the media, to strengthen its finances a bit.

In addition to the regulatory authorizations for use, the transaction must be submitted to Discovery shareholders for approval, but does not require any vote from AT&T shareholders.

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