AT&T Inc. is in talks to combine its media business with Discovery Inc. The deal would create a new giant in the entertainment industry. The agreement could be announced as early as this week, according to some sources. The project is to unite Discovery’s reality TV empire with AT & T’s vast media holdings, building an aggregation that can stand up to Netflix and Disney. According to the same sources, AT&T would lead the new information and entertainment giant.
Any agreement, in any case, would mark an important change in the company’s strategy, after years of work to unite telecommunications and multimedia resources and investments that have reached 85 billion euros under one roof in the last three years. AT&T acquired some of the largest entertainment brands through the acquisition of Time Warner Inc., completed in 2018. The deal would underscore the difficulty of AT&T and Verizon to profit from their media operations. Through its WarnerMedia unit, AT&T owns Cnn, Hbo, Cartoon Network, TBS, TNT and the Warner Bros studio. For its part, Discovery, supported by cable tycoon John Malone, controls networks such as HGTV, Food Network, TLC and Animal Planet .
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Growth through (expensive) acquisitions
Under the leadership of David Zaslav (chairman of the group’s CEO), Discovery has grown through acquisitions, and Discovery’s A-class shares have risen more than 18% this year, valuing the company at nearly $ 24 billion. AT&T grew 12%, with a market capitalization of $ 230 billion. The details of the operation are still being defined and could also result in a halt to the operation.
AT&T CEO John Stankey intervened on the sprawling telecommunications titan, cutting staff and selling assets with underperforming. The company has invested to roll out its 5G wireless network and its fiber optic network. AT&T ramped up film and television production to attract subscribers to its HBO Max streaming service but also needed cash to pay off debt; the company has become one of the most heavily indebted in the world after an extensive acquisition campaign and, although it has paid what it owes, the accounts are now suffering.
The challenge to Netflix and the streaming card
The Discovery deal could give the combined company enough programming to compete with Netflix and other streaming services in a global battle over the future of entertainment. In 2019, Disney bought 21st Century Fox Inc.’s entertainment business for $ 71 billion, largely to grow in size and upgrade its streaming services. It later launched Disney + in November 2019 and already has more than 100 million subscribers. Both Discovery and AT & T’s media unit WarnerMedia have attempted forays into streaming. Discovery debuted Discovery +, which has a wide range of reality shows, while AT&T made a big bet on HBO Max, which launched a year ago and includes HBO programming and films from AT & T’s Warner Bros. studio. Both companies are rapidly expanding their streaming services around the world.