On the 17th of May 2021, AT&T Inc. and Discovery, Inc. announced a definitive agreement to combine Warner Media with Discovery to create a standalone global entertainment company. The value of the deal is $96,153m. The transaction would be spun off into a new publicly-traded company known as “Warner Bros. Discovery”.
As stated by the new company’s CEO, David Zaslav, the business expects to create at least $3bn in expected cost synergies annually. This would increase the company’s investments in content and digital innovation, and to scale its global DTC (direct to consumer) business. The new company expects to generate $52bn in sales and $14bn in pretax profit by 2023.
Streaming industry market
The merge was mainly made to establish a strategic position in the streaming industry and be a valid competitor for the current leader in the sector: Disney, which currently has 104m subscribers only in Disney+, and Netflix, with 208m subscribers. The new company will have the combined subscribers of HBO, HBO Max, and Discovery+ for a total amount of 79m. The incredible growth of this industry is testified by the expected CAGR registered for the Worldwide Subscription Video-on-Demand (SVoD) Industry in the time 2020-2026, which is 11.56% and brings the total value of the industry in 2026 at $126bn.
Discovery and Warner Media
The transaction will combine Warner Media’s storied content library of popular and valuable IP with Discovery’s global footprint, a trove of local-language content, and profound regional expertise across more than 200 countries and territories. The “pure play” content company will own one of the deepest libraries in the world, bringing together over 100 of the most cherished, popular, and trusted brands in the world under one global portfolio. This includes HBO, Warner Bros, Discovery, DC Comics, CNN, Cartoon Network, HGTV, Food Network, the Turner Networks, TNT, TBS, Eurosport, Magnolia, TLC, Animal Planet, Id and many more.
The merger between Warner Media and Discovery aims to bring together two entertainment leaders with complementary strengths with the goal of positioning the new company as a leading global “direct-to-consumer” streaming platform. The challenge will be to compete in the increasingly important world of streaming which currently sees the two giants Netflix and Disney as protagonists. In addition, Discovery’s global footprint will support HBO Max’s growth, creating efficiencies that can be reinvested in producing other great content to give consumers what they want.
Authors: Giulia Chinca, Giuseppe Coviello, Samuele Menchini