* Text/Spades with long sword
On the other side of the ocean, a huge transaction of tens of billions of dollars quietly landed last night.
On April 8, the merger of Discovery and Warner Media was officially completed, and the deal cost the former $43 billion. Under an agreement signed last year by Discovery and Warner Media owner, U.S. telecom giant AT&T, the two parties will jointly establish a channel called Warner Bros. Discovery) new company, the current Discovery CEO David Zaslav also serves as CEO of the joint venture.
Warner Media has many familiar names, such as Warner Bros, DC Pictures, HBO Max, HBO Channel, CNN, etc.; Discovery has the Discovery Channel, which was founded in 1985, which mainly broadcasts documentary programs. The merger of the two means that there will be one more player in the streaming market who holds heavyweight IP such as "Superman", "Batman", "Game of Thrones", "Harry Potter" and so on.
I am afraid that many people will wonder why AT&T, a giant company that occupies one-third of the US telecommunications industry, would give away its precious media resources. In fact, it all started a few years ago.
This story began in October 2016 when the wealthy AT&T announced its $85.4 billion acquisition of Warner Media (then known as Time Warner) with the intention of transforming into a media business. Because of the most sensitive vertical integration issue in antitrust, the US Department of Justice and Trump, who is running for president, have expressed their opposition to it, and after a series of scorching lawsuits and reviews, AT&T finally added Time Warner to warner Media in June 2018.
The acquisition may seem like a positive for AT&T, but it's not.
As a telecom operator, the best way for AT&T to use Warner Media is to provide its telecom business users with exclusive access to HBO, DC and other content, so that it can grab a large number of customers from operators such as Verizon and T-Mobile to achieve a back-to-back business; however, AT&T launched the HBO Max subscription service we know shortly after the acquisition, which put it on the subscription track, which also means that it must confront streaming giants such as Netflix.
Even if Warner has "Friends" and "Rick and Morty", which have received unanimous praise in the industry, it is not easy to challenge the streaming giants. By the end of 2021, HBO Max and HBO Channel had only 73 million subscribers worldwide, while Netflix and Disney's Disney+ had 220 million subscribers and 130 million subscribers, respectively.
Previously, Warner Media abruptly announced at the behest of AT&T that the theatrical window would be cancelled, and all new movies would be watched on HBO Max on the first day of release. This is obviously to give its own streaming service a show, but Warner's approach is too radical, and its decision has caused a lot of criticism as soon as it comes out, and its long-time partner Christopher Nolan even publicly condemned it, and finally officially canceled the cooperation with Warner in 2021.
At the same time, the various acquisitions made in the early years also put AT&T on the back of huge debts, and according to the 2021 financial report, the company's long-term debt has reached a total of $152.82 billion. In this case, the sale of Warner Media, which has been unfavorable to growth, is obviously helpful for its current financial situation.
In any case, the era of AT&T imposing its will on Warner Media is over, and while it will continue to hold 71 percent of the joint venture as a controlling shareholder, the departure of former CEO Jason Kilar and Zaslav's succession reflect AT&T's tendency to delegate power to Warner Media and Discovery.
At present, the growth of HBO Max is still quite impressive, and after the merger with Discovery, the number of IPs of Warner Media is no less than that of Netflix and Disney+, and it is very likely to become the third pole in the streaming media war in the future. According to the two companies' estimates, the joint venture's revenue will reach $52 billion in 2023, and the valuation will exceed $120 billion.
*Image courtesy of Yandex