AT&T has announced plans to merge its WarnerMedia content unit, with American multinational mass media house, Discovery.
The deal paves the way for a new streaming giant that could compete with Netflix and Disney and also marks the entry of another player into a crowded market.
The proposed merger would put together movie giant Warner Bros. Entertainment, which owns the Harry Potter and Batman franchises, with Discovery’s home, cooking, nature and science shows to create “a premier, standalone global entertainment company”.
AT&T Chief Executive Officer, John Stankey said: “This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms.
“It will support the fantastic growth and international launch of HBO Max;with Discovery’s global footprint and create efficiencies which can be re-invested;in producing greater content to give consumers what they want.”
Meanwhile, HBO and HBO Max which is owned by WarnerMedia, now have around 64 million subscribers worldwide. It is currently overshadowed by larger competitors Netflix, which has 208 million subscribers, and;Disney plus, which has more than 100 million.
That notwithstanding, Discovery, whose portfolio includes Animal Planet;and the Discovery Channel, reaches more than 88 million US homes, while its Discovery plus;streaming service, which launched in January, has 15 million subscribers.
AT&T intends to split off the assets it acquired when it bought Time Warner for 85 billion dollars in 2018.
Under the terms of the deal, AT&T will receive 43 billion dollars through a combination of cash and debt. AT&T’s shareholders will own 71 percent of the new company, while Discovery shareholders will hold 29 percent.
However, before the deal was confirmed, David Cummings, Chief Investment Officer at Aviva, in;an interview said that shareholders may be uneasy.
He agreed that AT&T, in the face of huge streaming competition, needed to increase its amount of content, but added: “The market might feel this deal is a bit too late; I expect the market might be a little skeptical”.
When AT&T took over Time Warner three years ago, it planned to create a media and telecoms giant that combined content and distribution.
However, that proved to be a highly costly approach as the company was also expanding its next generation wireless services at the same time.
AT&T recently added 14 billion dollars to its debt pile to fund the purchase of wireless spectrum. The Discovery deal is the latest move in the company’s steps to reduce those debts.
AT&T is the world’s largest telecoms company in the world by revenues. It was established in 1877 by Alexander Graham Bell, who obtained the first US patent for the telephone.