AT&T is in talks with Discovery, Inc. to merge its media enterprise with the sprawling tv firm, Bloomberg reported on Sunday.
Bloomberg studies that the 2 media giants might unveil an settlement as early as this week.
Beneath the phrases floated by Bloomberg, AT&T would spin off WarnerMedia into the newly mixed firm, making a TV, movie and streaming powerhouse. AT&T would contribute property together with WarnerMedia and HBO Max with Discovery’s actuality television-heavy properties, such because the Discovery Channel, HGTV, TLC, Meals Community, OWN and Animal Planet, amongst others.
Some on Wall Road have predicted additional mega-deals, with a lot current deal with a potential merger of Comcast’s NBCUniversal and WarnerMedia.
When reached by The Hollywood Reporter, a Discovery consultant declined remark. “We don’t touch upon rumor and hypothesis,” stated an AT&T consultant.
If such a deal have been to be accomplished, it will be the biggest media/leisure merger since Viacom and CBS re-merged to create ViacomCBS final yr. It could additionally proceed a development of consolidation within the trade, after The Walt Disney Co. acquired the leisure property of twenty first Century Fox in 2019, and after Discovery acquired Scripps Networks Interactive for $14.6 billion in 2018. These offers have been all about bulking as much as tackle upstart streaming companies like Netflix.
Discovery’s administration workforce, led by CEO David Zaslav, has usually touted the agency’s deal with life-style and different non-fiction content material, arguing that this permits it to keep away from a crowded area by which all Hollywood giants are competing for streaming subscribers. Nonetheless, media mogul John Malone, who controls a voting stake of greater than 20 p.c in Discovery, has prior to now talked about how “free radicals,” or medium- to smaller-sized media corporations, ought to merge to spice up their scale.
A Discovery deal would additionally mark a stark change in technique for AT&T, which acquired the former Time Warner assets for $85 billion in 2018. AT&T, because it occurred, additionally lately unwound one other main acquisition earlier this yr, when it spun off its pay-TV enterprise (together with DirecTV) in a deal with private equity firm TPG. AT&T acquired DirecTV for $67 billion (inclusive of debt) in 2015, and the enterprise was valued at simply over $16 billion this yr.
AT&T has been searching for to dump lots of its property because it manages its excessive debt load, which at the moment totals practically $180 billion.
The merger, very like the Disney-Fox acquisition, would come because the media and leisure enterprise is in transition, as corporations constructed round distributing programming by way of pay-television, a number of paid home windows and theatrical distribution shift to promote their wares on to shoppers, a change precipitated by the fast rise of Netflix.
Disney has moved all-in on that technique, reorganizing the entire company round streaming final yr.
Each WarnerMedia, led by Jason Kilar, and Discovery, led by David Zaslav, have rebooted their respective corporations’ streaming efforts prior to now yr by way of HBO Max and Discovery+ respectively. It stays unclear what such a merger would imply for these companies, although merging them to create a bigger competitor to Netflix appears possible.
It’s also unclear what roles Zaslav or Kilar would have within the new firm.
LightShedPartners analyst Richard Greenfield earlier this yr known as for a merger of NBCUniversal and WarnerMedia, arguing: “In at the moment’s media world, we consider centered scale is the one approach to be each giant sufficient and nimble sufficient to embrace technological change and carve a significant area in a tech platform-dominated panorama.”
MoffettNathanson’s Michael Nathanson has equally spoken of such a “logical mixture” as a manner “to offer the mixed corporations the wanted scale to compete with Disney and Netflix.”
A Comcast consultant declined to remark.
One factor Wall Road analysts have been discussing on Sunday was what WarnerMedia property can be included in a deal. MoffettNathanson analyst Craig Moffett informed THR that it was “not fully clear whether or not it’s all property or simply the cable networks.”
If a deal was centered on the AT&T cable networks, “then it’s merely a manner for AT&T to shed one other bundle of underperforming property,” the analyst stated. “Discovery would stand to achieve from Turner’s programming, CNN, and AT&T would then have the ability to focus simply on HBO Max, which is clearly the crown jewel of WarnerMedia at this level.”
If all of WarnerMedia is a part of a deal, “then it’s all in regards to the streaming platforms,” Moffett stated. “That may make this a deal about streaming scale, globally in addition to domestically. Contained in the U.S., WarnerMedia would deliver Discovery content material scale, notably in scripted leisure, but in addition in information with CNN, which might match Discovery’s mannequin properly. Discovery would deliver WarnerMedia distribution scale, notably outdoors of the U.S. To succeed long run in streaming, they’ll want each.”