DEAL: AT&T Is Preparing to Combine Its Media Assets With Discovery TV

The U.S tech giant, AT&T announced on Monday, 17th, that it would merge its content unit, WarnerMedia, with Discovery’s reality-TV dynasty. Some reports say that the partnership will create a massive new entertainment entity that will compete with rivals like media giants Netflix and Disney. 

CNBC gave in its report that the agreement will see AT&T unwind its $85 billion acquisition of Time Warner, which closed just under three years ago and form a new media company with Discovery. The “tax-friendly deal” would create a new business, separate from AT&T, that could be valued at as much as $150 billion, including debt.

Bloomberg reports stated that the transaction will be structured as a so-called Reverse Morris Trust, or a merger with another company that’s structured to be tax-free. The idea is to combine Discovery’s reality-TV empire with AT&T’s vast media holdings, building a business that would be a formidable competitor to Netflix Inc. and Walt Disney Co. 

“Any deal would mark a major shift in AT&T’s strategy after years of working to assemble telecommunications and media assets under one roof. AT&T gained some of the biggest brands in entertainment through its acquisition of Time Warner Inc., which was completed in 2018,” according to Bloomberg’s report. 

The merger will likely see AT&T’s business valued at over $50 billion including debt and an agreement. “The U.S tech giant also confirmed that Discovery President and CEO David Zaslav would lead the new company. The board would consist of 13 members, seven initially appointed by AT&T including the chair, and Discovery would appoint six members, including Zaslav,” CNBC reports. 

“It is super exciting to combine such historic brands, world-class journalism and iconic franchises under one roof and unlock so much value and opportunity,” Zaslav said, adding that AT&T and Discovery’s assets “are better and more valuable together.” In his statement, he clarified the new firm’s mission, saying its singular goal is “to focus on telling the most amazing stories and have a ton of fun doing it.”

However, the future of WarnerMedia’s current CEO, Jason Kilar, is uncertain. On a press call Monday morning following the announcement, Stankey said Kilar still holds his title, but it will be up to Zaslav to decide if Kilar still has a job with the new company.

AT&T owns CNN, HBO and Warner Bros. after it acquired Time Warner since renamed to WarnerMedia. Discovery’s channels include Animal Planet, TLC and the Discovery Channel.

Zaslav said on the press call Monday that he believes the combined company will be able to differentiate itself from top streaming services like Disney+ and Netflix by offering a combination of news and sports on top of its entertainment properties like “Game of Thrones” and Harry Potter.

Stankey and Zaslav said the two companies already spend a combined $20 billion per year on content, putting them in the same realm as Netflix, which currently spends about $17 billion on content per year.

Zaslav did not provide concrete details for what the new combined company’s streaming offering will look like but did say there will be a lot of flexibility. HBO Max is preparing to launch a cheaper, ad-supported version of its service in the coming weeks. And Discovery+, which launched early this year, offers an ad-supported version as well.

“We’re going to do it differently,” Zaslav said on the press call Monday. “We will have the flexibility here in the U.S. and around the world to determine how we create the ecosystem around this extraordinary IP… we’ll see over the next few years as we learn about what consumers want and how they want it.”

HBO and HBO Max reportedly have around 64 million subscribers worldwide. Discovery said last month it had reached 15 million paying subscribers.

By contrast, Netflix has around 208 million global subscribers, while Disney+ recently surpassed 100 million less than 1½ years after the streaming service launched.

The announcement came after reports over the weekend that the companies were in advanced talks to complete the merger.