AT&T is combining WarnerMedia with Discovery to create a new streaming giant

WarnerMedia Stankey
AT&T CEO John Stankey

  • AT&T said Monday it would merge its WarnerMedia content unit with Discovery.
  • The deal paves the way for a new streaming giant that could compete with Netflix and Disney.
  • AT&T would receive $43 billion in cash, debt securities, and WarnerMedia’s retention of certain debt under the proposed deal, according to an SEC filing.
  • See more stories on Insider’s business page.

AT&T on Monday announced plans to merge its WarnerMedia content unit, which includes HBO, TNT, CNN, and Warner Bros., with Discovery.

The deal paves the way for a new streaming giant that could compete with Netflix and Disney.

AT&T intends to split off the assets it acquired when it bought Time Warner for $85 billion in 2018.

AT&T would receive $43 billion in cash, debt securities, and WarnerMedia’s retention of certain debt under the proposed deal, according to an SEC filing. AT&T shareholders are set to receive stock equating to 71% of the new company, with Discovery shareholders owning the remainder.

The transaction, which has already been approved by both the AT&T and Discovery boards, is anticipated to close in mid-2022.

In its SEC filing, AT&T said that it expects the new company to have a 2023 revenue of around $52 billion.

AT&T said that the deal would create at least $3 billion in expected “cost synergies” annually for the new company, which could mean job cuts.

Discovery President and CEO David Zaslav is set to lead the proposed new company. Its board of directors will have 13 members: seven appointed by A&T, and six appointed by Discovery.

The company said it would combine WarnerMedia’s entertainment, sports, and news assets with Discovery’s entertainment and sports businesses to create “a premier, standalone global entertainment company.”

AT&T said that the new company would be able to invest in more original content for its streaming services, create new opportunities for under-represented storytellers and independent creators, and create more family-friendly nonfiction content.

AT&T had been planning to expand HBO Max internationally, and the Discovery combination could be a big boost to those plans. Discovery owns European rights to Olympic Games and owns Eurosport.

AT&T, which has been led by John Stankey since July 2020, has seen steady growth of HBO Max since it launched last year. It gained almost 3 million subscribers in the first quarter of 2021, bringing total subscribers to 9.7 million. The platform is set to expand its reach from just the US, launching in Latin America next month. In total, HBO Max and HBO combined have about 64 million subscribers globally, compared to Netflix’s 208 million.

Discovery Plus launched in the increasingly crowded streaming market in January. The streaming platform is home to 55,000 episodes of shows from brands like HGTV, Food Network, TLC, A&E, History Channel, and the Discovery Channel, which airs the popular Shark Week series each year. Discovery Plus also features content from the BBC.

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