The streaming world just got a big shakeup. On Monday, telecommunications giant AT&T announced that it would be spinning off WarnerMedia and combining it with cable programming company Discovery in a brand new venture. The decision to spin off WarnerMedia—which includes HBO, HBO Max, Warner Bros. studios, CNN, and several other cable networks—comes three years after AT&T acquired TimeWarner for $85 billion, in the hopes of becoming a colossal media empire.
Even before the acquisition, industry experts wondered whether AT&T’s decision to purchase TimeWarner was a smart one, especially considering the fact that cord-cutting and streaming services were only growing in popularity. The spinoff suggests the acquisition was ultimately a bust for the wireless provider.
The deal, pending regulatory approval, would combine WarnerMedia with Discovery, which owns HGTV, the Food Network, Animal Planet and Oprah Winfrey’s OWN—creating one of the largest media companies in the U.S. The newly-merged conglomerate effectively allows AT&T to undo its acquisition, with the wireless provider receiving $43 billion in cash, debt securities, and WarnerMedia’s retention of debt in the spinoff.
“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,” said AT&T CEO John Stankey in a press release. “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 more great content to give consumers what they want.” The conglomerate formed by this merger will be bigger than Netflix or NBC Universal, but smaller than Disney, making it the second-largest media company in the U.S.
To complete with Netflix and Disney, AT&T and Discovery both separately invested in streaming. AT&T spent a few billion dollars to launch streaming platform HBO Max, which currently has about 20 million subscribers, while Discovery launched its Discovery+ app, which has about 15 million subscribers. David Zaslav, Discovery’s CEO for the past 14 years—who helped grow the network into a reality television powerhouse—will lead the new venture.
Both WarnerMedia and Discovery have a host of successful titles under their belts already. WarnerMedia’s crown jewel is HBO—an award-winning powerhouse that’s home to heavily-lauded shows like Succession and Last Week Tonight With John Oliver, as well as a huge catalogue of beloved series like The Sopranos, Game of Thrones, and Sex and the City. Discovery, meanwhile, is best known for its expansive reality programming, like 90 Day Fiancé, Property Brothers, and Naked and Afraid. In a virtual press conference about the merger, Zaslav said, “I think we fit together like a glove.”
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