Warner Discovery Merger ‘The Great Escape’ for AT&T

Telecom giant AT&T announced Monday a deal to combine its content unit WarnerMedia with Discovery, paving the way for one of Hollywood’s biggest studios to compete with media giants Netflix and Disney. Right now HBO Max is ranked 7th in streaming just behind Hulu in the coveted streaming market.

Under the agreement, AT&T will revisit its $85 billion acquisition of Time Warner, which closed just under three years ago, and form a new media company with Discovery. The deal would create a new business, separate from AT&T, that could be valued at as much as $150 billion, including debt, according to The Financial Times.

AT&T said it would receive a combined amount of $43 billion in a mix of cash payment, debt, and WarnerMedia’s retention of certain debt. AT&T shareholders would receive stock representing 71% of the new company, while Discovery shareholders would own 29%, it added.

If approved by regulators, the deal effectively reverses AT&T’s years-long plan to combine content and distribution in a vertically integrated company. The companies said the deal is expected to close in the middle of 2022. AT&T said Discovery President and CEO David Zaslav will lead the new company, which will have a new name announced in the future. The board would consist of 13 members, seven initially appointed by AT&T including the chair, and Discovery would appoint six members, including Zaslav.

It is easy to understand that the current management of WarnerMedia is looking over their shoulder not confident what this means for their future at the Warner-Discovery merger. 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.

Barry Diller, the chairman of IAC and Expedia, called the WarnerMedia-Discovery merger the “great escape” for AT&T. “It’s the power of monopoly. Ma Bell should be dead and buried by now,” he said, referring to AT&T’s old nickname when the company was called Bell Telephone.

In this writer’s opinion, the merger is a vote of “No Confidence” in the current heads at WarnerMedia and the ultimate divesting of the daily money-losing ventures in media. Business is business and with the addition of new blood “Discovery President and CEO David Zaslav,” there is hope that he can justify their original 85 Billion dollar investment.

So what does this mean to the entertainment industry and DC intellectual properties? Most likely it will be business as usual for the next year till the deal is finalized with possible managerial movement as each person decides to stay the course at Warner or jump ship. TV and movie projects that are in the works will be scrutinized but proceed as planned. Contractual agreements will be honored but new projects will not necessarily be green-lighted with the uncertainty of the future.

DC Comics which was already in trouble will make a great effort to justify not being sold post merger. As we discussed in an earlier post “DC COMICS’ LAST STAND?” the “powers to be” could just sell the comics properties to rid them of a money loosing situation.

In the financial area money makes the world go round. I am sure that Zaslav will look at everything in the new Warner-Discovery through a profitable lens and cut the fat where he sees fit. He did that with Discovery and made it very profitable. Nothing is sacred even the iconic characters of the DC Films. Zaslav as we are told is in control and could be setting up Warner-Discovery to be sold to Disney, Apple, Amazon or NBC, Peacock Plus since that is where he worked previously.

Imagine the Justice League produced under Kevin Feige. Most likely any change in the DCU will be calculated and not happen quickly. Zaslav has expressed preserving the valuable assets in WarnerMedia for the future, but that does not mean they won’t be scrutinized if they don’t become profitable.

This sets up many possibilities including the outright sale of any intellectual and brick and mortar properties of WarnerMedia and Discovery. Separating AT&T from WarnerMedia and making its own company means they can sell their interest in the new company and divest themself of Warner-Discovery if they want in the future. I am sure AT&T sees this as a win-win situation but it could be a loose-loose for the fans.

My feeling is that the old Warner Bros. needed a major change to break from the woke direction that much of the programming is leaning. I hope that they will return to the popular storytelling the public wants. At Comics Talk we will keep our ears to the rail to hear when the news train is coming down the superhero entertainment track.