NEW YORK (AP) The merger of AT & T’s Discovery and WarnerMedia operations, marrying HBO and CNN with HGTV and Oprah Winfrey, is another illustration of the speed at which streaming has transformed the media world.
Companies are essentially betting $ 43 billion that they’ll always be in the mix when consumers decide how to spend their monthly entertainment budget.
The deal was announced Monday after AT&T CEO John Stankey and his Discovery counterpart David Zaslav worked on the details of Zaslav’s Brown Stone in Manhattan for the past two months.
I think together this combination makes us the best media company in the world, said Zaslav, who will lead the new company if the approvals are granted, probably next year.
The deal also represents a strategic retreat for AT&T.
The hope for the newly merged company is that, with a wider array of material that either cannot offer on its own, it can join Netflix, Amazon, and Disney in the widely recognized first tier of streamers.
Analysts say it’s also imperative that services below that level believe Paramount + or Peacock find a way to grow or risk being left behind.
WarnerMedia and Discovery have both launched their own streaming services, HBO Max and Discovery +, in the past two years. It’s still unclear whether the merger will result in a single streaming service or several bundled together, but it will have a huge range of content to offer: scripted and reality TV, movies, sports, including the NBA men’s basketball tournament. and NCAA, and news with CNN.
With consumers finding out which streaming services they use regularly and which they can opt out of, that depth means a better chance of using that new one on a regular basis, said Raj Venkatesan, professor of business administration at the University of Virginia. The average American household spends $ 40 per month on streaming services.
It has something for everyone in the family or is so diverse it’s hard to explain, said Jim Nail, analyst at Forrester Research.
David Schweidel, professor of commerce at Emory University, questioned whether consumers would be better off with the deal.
If I decide to cut the cord and need three to five services to get what I had before, that bill could easily come close to what I paid for cable before, Schweidel said. This can end up hurting consumers.
HBO Max and HBO have a combined global subscriber base of approximately 63.9 million, and Discovery + has approximately 15 million subscribers. This compares to Netflix, which has over 200 million subscribers worldwide, and Disney +, which has over 100 million.
During a call with investors, Zaslav said he believed the standalone company could garner 200, 300, 400 million subscribers at some point in the future, but there were no details of a timeline. .
The deal is a clear reminder of how much the entertainment world has changed, said Tim Hanlon, CEO of media consultant Vertere Group.
I think most consumers now see live TV as some kind of anachronism, he said.
While this increases the pressure on smaller streaming services like Peacock or Paramount + to find partners, these two are affiliated with the NBC and CBS television networks, which would require rethinking the industry’s regulatory process. the broadcast, Hanlon said.
This is the second time this year that AT&T has ended a major acquisition as it navigates a rapidly changing media landscape. In February, the company split the satellite TV service DirecTV for a fraction of the $ 48.5 billion it paid in 2015.
Dallas-based AT&T acquired the former Time Warner company for more than $ 80 billion less than five years ago in an effort to control both sides of the entertainment process: the broadband and wireless services that help to provide entertainment to homes and the entertainment itself. But the costs involved in trying to do both have become a burden.
This vision clearly did not materialize, CFRA analyst Tuna Amobi said.
The new company will be able to cut costs by $ 3 billion per year, the companies said, money that could be spent on original streaming content. It will house nearly 200,000 hours of programming and bring together more than 100 brands under a single global portfolio, including DC Comics, Cartoon Network, Eurosport, Magnolia, TLC and Animal Planet.
This likely means layoffs as companies consolidate.
The deal is also likely to force major decisions on well-known brands. For example, CNN chief executive Jeff Zucker said he plans to leave at the end of the year. But with the new company led by Zaslav who worked with Zucker at NBC in the 1990s, that equation could change.
Zaslav called Zucker an extraordinary talent. It’s all about talent, so we’ll figure out how to make sure the best people stay, he said.
Shares of Discovery Inc., which is based in Silver Spring, Md., Fell $ 1.80, or 5%, to close at $ 33.85 on Monday after initially surging to $ 39.70. AT & Ts stock ended the day down 87 cents, or 2.7%, at $ 31.37, down from the session high of $ 33.88.
AP business editors Tali Arbel, Anne D’Innocenzio and Michelle Chapman contributed to this report.