We’ve seen Disney gobble up Fox, and we’ve seen CBS merge with Viacom. Now the next major corporate merger is WarnerMedia and Discovery, which will combine to form a new company. Just a few years after AT&T bought Time Warner for $85.4 billion, the telecommunications company appears to be throwing in the towel. As first reported by the Los Angeles Times on Sunday night and confirmed on Monday by the parties involved, AT&T is spinning off WarnerMedia, merging it with Discovery Inc. – the entertainment company responsible for channels like HGTV and the Food Network.
As announced in a press release, this new company will ““compete globally in the fast-growing direct-to-consumer business, bringing compelling content to direct-to-consumer subscribers across its portfolio, including HBO Max and the recently launched discovery+. The transaction will combine WarnerMedia’s storied content library of popular and valuable IP with Discovery’s global footprint, trove of local-language content and deep regional expertise across more than 200 countries and territories.”
Discovery CEO David Zaslav will lead this new company, and shortly after the announcement it was revealed that WarnerMedia CEO Jason Kilar is already negotiating his exit. He is currently still heading up WarnerMedia, and the deal to merger WM with Discover is not expected to close until 2022. AT&T will received $43 billion in cash, debt securities, and WarnerMedia’s retention of certain debt as the telecommunications company gets back to focusing on cell phones and cell service.
“We think together, the combination makes us the best media company in the world,” Zaslav said Monday to reporters (via THR), noting that the combined company will spend $20 billion on content. “We will be one company, one culture, one mission: Great stories, great content that entertains people in every country around the world.”
As for streaming, Zaslav said they're still mulling their options. “We will have enormous flexibility in how we package our streaming services,” Zaslav said, adding that “we will look at the range of options to unlock value here in the U.S. and around the world,” including a super pack that combines all the assets in one service, or a bundled offering similar to what Disney is doing with Disney+, Hulu, and ESPN+.
AT&T’s offloading of WarnerMedia comes after the corporate giant laid off over 2,000 WarnerMedia employees last year, so today’s news is bittersweet. On the one hand, AT&T never seemed like a great fit for WarnerMedia anyway, but on the other hand this little “experiment” cost a lot of people their livelihoods.
AT&T’s handling of WarnerMedia also completely upended the industry. It was WarnerMedia’s push to increase HBO Max subscribers that led to the shocking decision to release all of Warner Bros.’ 2021 films on HBO Max and in theaters on the same day, a decision that caught all of the filmmakers behind said 2021 films by surprise. Denis Villeneuve went so far as to say the kneecapping of Dune’s box office potential likely killed his plans for a sequel and WB staple Christopher Nolan slammed the studio for the deal. For his part, Zaslav said "building relationsihps with the creative community" will be his "number one priority," addressing the aforementioned controversial decision.
It was also AT&T’s intense push to increase content at an exponential rate that led to frustrations at HBO and HBO Max, as HBO had spent years building up its brand as a prestige, curated outlet for great content only to now be forced to become a content farm with a limited budget. Longtime executives like Richard Plepler exited HBO in the wake of AT&T-imposed changes, and while HBO and HBO Max have still managed to create solid content, the pressure may have negatively impacted series that are currently in development or production.
Indeed, AT&T was aiming to turn HBO Max into a Disney+ rival, and while I’d argue HBO Max is one of the best streaming services out there (in terms of original content, library content, and UI experience), AT&T didn’t quite understand how to build a boutique streaming service.
What happens next is anyone’s guess. Discovery has recently launched its own streaming service, Discovery+, to solid success, so it’ll be interesting if the content on Discovery+ gets folded into HBO Max, or vice versa.
This merger is just the latest sign of an industry that keeps gobbling each other up in the hopes of forming one giant mega-corporation bent on (streaming) world dominance. When Disney isn’t content to just have Marvel, Lucasfilm, and Pixar and instead feels the need to buy an established, legendary film studio like 20th Century Fox, you know we’re in trouble.
As a fan of HBO, HBO Max, and a lot of what Warner Bros. produces, my hope is that this merger takes some of the pressure off the WarnerMedia company. Or at least puts someone in charge that knows a thing or two about entertainment, instead of forcing the WarnerMedia employees to take orders from a cell phone company.
This is a developing story so more information will likely drop today and over the next few days. So stay tuned.