AT&T announces $43 billion deal to merge WarnerMedia with Discovery

Discovery and AT&T have struck a definitive agreement to combine WarnerMedia’s  entertainment, sports and news assets with Discovery’s nonfiction and international entertainment and sports businesses to create a standalone global entertainment company.

Under the terms of the agreement, AT&T would receive US$43 billion, subject to adjustment, in cash, debt securities, and WarnerMedia’s retention of certain debt, and AT&T’s shareholders would receive stock representing 71% of the new company; Discovery shareholders would own 29% of the new company. The boards of both AT&T and Discovery have approved the transaction.

The combined company will be led by Discovery’s David Zaslav as CEO and president. The 13 member board will be made up of seven appointees from AT&T and six from Discovery, including the CEO.

The new company’s Board of Directors will consist of 13 members, 7 initially appointed by AT&T, including the chairperson of the board; Discovery will initially appoint 6 members, including the CEO.

The primary driver of the move is an acknowledgement from both parties that huge scale is required to compete in the streaming world with the likes of Disney and Netflix – more than either had individually. 

While HBO Max and discovery+ have made strides since their respective 2020 and 2021 launches, their low double-digit subscriber numbers are still some way off the 200-plus million of Netflix, and the 104 million Disney+ subscribers announced last week.

AT&T said that this new ‘pure play’ content company will own one of the deepest libraries in the world with nearly 200,000 hours of programming. While the announcement said that both companies – and their shareholders – will benefit from the streaming depth the merger provides, it is currently unclear as to what that means for HBO Max and discovery+. More details will emerge at a later date, but the services will continue as standalone platforms for the foreseeable future.

Of the deal, AT&T CEO John Stankey said: “This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms. It will support the fantastic growth and international launch of HBO Max with Discovery’s global footprint and create efficiencies which can be re-invested in producing more great content to give consumers what they want.”

Discovery’s Zaslav added: “During my many conversations with John, we always come back to the same simple and powerful strategic principle:  these assets are better and more valuable together.  It is super exciting to combine such historic brands, world class journalism and iconic franchises under one roof and unlock so much value and opportunity.

“With a library of cherished IP, dynamite management teams and global expertise in every market in the world, we believe everyone wins…consumers with more diverse choices, talent and storytellers with more resources and compelling pathways to larger audiences, and shareholders with a globally scaled growth company committed to a strong balance sheet that is better positioned to compete with the world’s largest streamers.”

This is not the first time that AT&T and Discovery have considered merging their streaming operations. In 2019, the pair of CEOs discussed the prospect of launching an US$8 single streaming service with their assets (asides from HBO), but the plans were scrapped when the US$6.99 per month Disney+ was revealed later that year.