 "An AT&T logo and communication equipment on a building in Los Angeles")
AT&T will join its massive media operations that include CNN, HBO, TNT and TBS in a $43 billion deal with Discovery, the owner of lifestyle networks including the Food Network and HGTV.
The new media company enters a streaming arena that has been flooded in the past two years with new players including those owned by AT&T and Discovery which operate HBO Max and Discovery+, respectively.
Industry analysts believe the deal Monday is a signal that more mergers are ahead. One prominent analyst had been saying that Comcast’s NBCUniversal should merge with WarnerMedia, for example.
The rush into streaming has created a volatile environment with billions of dollars being plowed into new content that sets the top-tier platforms apart.
It is a major directional shift for AT&T which squared off with the Justice Department less than three years ago in an antitrust fight when it wanted to acquire Time Warner Inc. for more than $80 billion. That was a fight that AT&T won.
It’s not immediately clear what the new company would mean for customers, but it will likely allow the bundling of streaming services. For example, Disney offers its viewers Disney+, Hulu and ESPN. A standalone streaming service for CNN is also a possibility. The combined media company will be dwarfed in size by the rival streaming services.
HBO Max and HBO have a combined U.S. subscriber base of about 44 million, and Discovery+ has about 15 million subscribers. Netflix has more than 200 million subscribers worldwide, and Disney+ has over 100 million. Still, some media analysts say by joining forces, the new company will be better able to compete.
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“The new company will be able to join the upper tier of global (streaming) players: Netflix, Disney and Amazon,” Craig Moffett of MoffettNathanson told investors. It’s the second time this year that AT&T has calved off a recent a major acquisition as navigates a rapidly evolving media landscape. In February the company spun off DirecTV for a fraction of the $48.5 billion it paid for the satellite TV service in 2015.
In the all-stock deal, AT&T will receive $43 billion in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt.
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