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

Discussion in 'Internet Streaming Services' started by NashGuy, May 16, 2021.

  1. SledgeHammer

    SledgeHammer Icon

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    Netflix has been warning for YEARS now that they're pretty well saturated in the US market and will focus on expanding internationally on a go forward basis. They had a MASSIVE subscriber miss this past quarter when they announced earnings a few weeks ago. Thus they've gone from $600 to $488.

    You could theoretically write off Netflix as a Netflix specific issue due to loss of popular content like Friends and The Office as well as the ending of most of their few popular original shows. They've already lost 9% of their market share.

    One would theoretically assume those folks went to Disney. But guess what? After a very impressive start, Disney, who owns pretty much all the content worth watching, also had a huge subscriber miss this past quarter.

    Seems pretty straight forward to me, streaming customers will follow the content, of which Netflix has a HUGE problem. It's self perpetuating. Netflix loses content -> Netflix loses customers -> Netflix loses revenue -> Netflix stock price goes down -> Netflix loses it's ability to get popular content. Rinse. Repeat.

    Wouldn't be surprised to see Netflix lose more market share and eventually be bought for its customer base. No, not predicting its demise tomorrow or even next year. Just saying it has a content issue in the US.
     
  2. b4pjoe

    b4pjoe DBSTalk Club DBSTalk Club

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  3. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Gold Club DBSTalk Club

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    For the DIRECTV spinoff the board isn't AT&T. AT&T's control of the board is limited to appointing two members (40%). That is all. Their ownership is an investment ... not a purchase of control.
    If WarnerMedia is spun off under a similar arrangement expect the deal to be similar. Selling control but keeping preferred/common shares as an investment.
     
  4. Getteau

    Getteau Icon

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    I just wish the services bundling the free tier with your mobile service would let you add-on the extra couple of dollars for the ad-free tier. We get the Hulu ad-version through our Sprint Unlimited plan (the $6 version of Hulu). However, there is no way for me to upgrade to the ad-free version without paying for the entire thing. If I had the option of going Ad-Free for $6, I might do it. however, I'm not going to spend $12 a month for it. I tried to watch the $6 version a few times, and couldn't get past all the ad's in each show. So at this point, the Hulu app on our devices goes farther and farther down the list of apps on our TV and the ones without Ad's keep moving closer and closer to the top.
     
  5. phrelin

    phrelin Hall Of Fame DBSTalk Club

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    I guess I'm not particularly worried about Netflix with its 208 million global subscribers. Every other service is playing catch-up with less than 50% even at Disney+. Far more people signed up for Disney+ and Netflix in the first six months of the pandemic than anticipated so growth would return to normal levels as the pandemic winds down. What one has to watch is the average revenue per user which gives Netflix a real advantage for now. Of course one can't ignore Disney's Hulu which is not too far behind Netflix.

    In the meantime we have the Amazon MGM purchase rumors.
     
  6. NashGuy

    NashGuy Well-Known Member

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    Yeah, that stinks. But Sprint is kinda defunct now. Obviously T-Mobile isn't going to change those plans. At some point, I'm sure, they'll force you to transition over to an actual T-Mo plan or leave.

    That said, it looks like when Sprint launched the free Hulu deal, Hulu had already begun selling their $12/mo ad-free plan. Would've been nice if Sprint had offered an optional $6 upgrade to the ad-free plan. My bet is that Hulu didn't want that since they actually make *more* money on the cheaper $6 plan due to the ad revenue. I know that the free Disney bundle that Verizon offers on some plans includes only the ad-supported version of Hulu and, AFAIK, there's no way to pay extra and upgrade that either.
     
  7. NashGuy

    NashGuy Well-Known Member

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    Disney+'s global ARPU is dragged down because it's sold so cheap in parts of Asia. Jason Kilar (now running HBO Max for at least awhile longer) did a good job as CEO of Hulu. It now has over 40 million US subs, just behind HBO/HBO Max.

    Hmm, first I've heard of that one. The big one I read about today is NBCU and ViacomCBS. NBCU and Warner had been in talks and while I think it would've been a better match-up than Warner and Discovery, I think AT&T was so scared of another anti-trust trial and they opted for the easier deal. So now NBCU is left looking for someone else to help them scale up to compete with Disney and Netflix.

    Still available:
    • ViacomCBS
    • Sony Pictures (less interesting after just striking a long-term output deal with Netflix)
    • Fox (broadcast, news, sports nets)
    • Lionsgate (includes Starz)
    • AMC
    • MGM (includes Epix)
    • Crown Media (i.e. Hallmark nets, privately held)
     
  8. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Gold Club DBSTalk Club

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    Telecom giant AT&T announced Monday a deal to combine its content unit WarnerMedia with Discovery, paving the way for one of Hollywood’s biggest studios to compete with media giants Netflix and Disney.

    Under the agreement, AT&T will unwind its $85 billion acquisition of Time Warner, which closed just under three years ago and form a new media company with Discovery. The deal would create a new business, separate from AT&T, that could be valued at as much as $150 billion, including debt, according to The Financial Times.

    AT&T said it would receive an aggregate amount of $43 billion in a combination of cash, debt and WarnerMedia’s retention of certain debt. AT&T shareholders would receive stock representing 71% of the new company, while Discovery shareholders would own 29%, it added.
     
  9. inkahauts

    inkahauts Well-Known Member

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    I don’t expect FOX to merge with anyone. They are what they are for the foreseeable future imho.

    You won’t see NBC and CBS merge. Not happening.

    Sony maybe but they’d Lilly be the buyer if someone else like lions gate and amc maybe. I could see Viacom going after those two as well. Maybe even NBC. But really I don’t expect to much from NBC.

    And I doubt crown will ever be sold.
     
  10. wmb

    wmb Godfather

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    No. I think they are done with brand loyalty and are happy to cut and run, taking their money to the shiny new thing.

    Except maybe Disney, but Disney has their fingers into so many piece of the media pie. Theme parks… kid programming… movies… TV…


    Sent from my iPhone using Tapatalk
     
  11. NashGuy

    NashGuy Well-Known Member

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    ViacomCBS is in the most need to scale up and I had anticipated that they might form a "team of leftovers" by buying up Lionsgate, MGM and/or AMC. But looks like Amazon is close to buying MGM for $9 billion. Wonder if Epix will just get folded into Prime Video? The Epix Originals slate is rather underwhelming but Amazon may prefer to bolster Prime Video with Epix's film library, including recent Paramount and MGM films, rather than try to keep it alive is a little $6/mo cable and streaming service. Can't really see Epix surviving long-term.

    An NBCU/ViacomCBS merger likely could not happen without the feds forcing either NBC or CBS (and their O&O local affiliates) to be sold off. It's not out of the question for them to merge and then keep all the Viacom channels and content, Paramount studios, and Showtime, then merge Paramount+ content (minus the CBS shows) into Peacock. (Maybe Showtime content would get merged into Peacock as well, or maybe everything would just stream under the arguably stronger Showtime brand as an HBO Max-like competitor.) Anyhow, in this unlikely hypothetical, CBS and its news division would have to be either sold to another buyer or spun off as a small solo operation. Perhaps WarnerDisco would buy CBS. (A major broadcast network is about the only thing they lack, and CBS's longstanding news operation, including 60 Minutes, might be a nice complement to CNN on cable.) At any rate, now that both Warner and Discovery are off the table, ViacomCBS is really the only significant player left for NBCU to tie up with. They've reportedly already approached them about selling Peacock and Paramount+ as a bundle deal.

    Anyhow, here's a story about the pressures now faced by NBCU and ViacomCBS in the wake of the WarnerDisco deal:
    https://www.cnbc.com/2021/05/17/warnermedia-discovery-deal-pressures-viacomcbs-and-nbcuniversal.html

    Sony seems like they want to remain an independent, mid-sized studio that creates and supplies content to multiple buyers. And their recent deal to supply their recent theatrical films to Netflix, starting with their 2022 slate, helps in that regard. (Their current deal is with Starz.) But Lionsgate and AMC, I dunno, it's just going to be increasingly hard for them. But not every service has to be huge to survive and be profitable, I guess. Maybe Starz and AMC+ can survive long-term as they are.
     
  12. phrelin

    phrelin Hall Of Fame DBSTalk Club

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    Regarding Paramount- I'm sure I'm wrong, but when I saw this screen I thought they could methodically build a streaming "channel" that could effectively compete across age groups and interests:

    [​IMG]

    It would require focus like that found at Apple+ and Prime which do have significant financial interests beyond streaming. Maybe it wouldn't be possible and they really need to integrate Showtime, but one could always hope.
     
  13. Steveknj

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    I think at some point, we are going to have a major consolidation and the major players will eventually be, Comcast, Disney, Amazon and Google, though I could see CBSViacom taking a shot at Netflix to try and get back in the game. As with so much that happens in corporate America, any business worth getting into will have major consolidation and will be controlled by a few larger corporations. It has taken awhile to begin this real consolidation, but I think it's happening now. I think 2023 will look a lot different than what we see now.

    And of course with this consolidation, it will probably mean less content and higher prices, as these companies start to weed out some of the more boutique offerings and things will be more mainstream.
     
  14. harsh

    harsh Beware the Attack Basset

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    As long as common shares are voting shares, AT&T will maintain a certain level of control over the Board with their large majority holdings.
     
  15. NashGuy

    NashGuy Well-Known Member

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    There are a few big global direct-to-consumer video players that look pretty secure to me: Netflix, Amazon, Disney, and now WarnerDiscovery. Plus Google's YouTube, which is just a different sort of beast with its free user-uploaded content, essentially the world's video search engine. Beyond that, prospects are very questionable.

    Apple is the richest company in the world, so they certainly have the cash (and the customer relationships) to grow Apple TV+ into a mid-sized service focused on quality middlebrow originals, if they choose to stick with it, believing it will ultimately be a net contributor to their bottom line. We'll see.

    There will still be a place for small niche video services too, if they're priced right. As is already the case, some won't even have their own apps but they'll need to participate in aggregate platforms housed in larger apps, like Prime Video, Apple TV, Roku Channel. Perhaps even YouTube will eventually allow paid subscription channels inside their app.

    Outside of those mentioned above, though, it seem to me that all the other services are caught in the middle and are in danger. Things like Peacock, Paramount+, Showtime, Starz, and AMC+. These services and their parents companies don't have the scale to become global competitors to Netflix, Amazon, Disney and WarnerDiscovery. I think NBCU and ViacomCBS, if they don't somehow merge, will end up pulling the plug on their Peacock and Paramount+ services in the next few years. (Rather than merge at the top, perhaps they just combine Peacock and Paramount+ into a joint-venture streaming, as Hulu originally launched.) I think they'll find that they're better off just licensing their content out to the four bigger services rather than trying to make a go of their own US-only direct-to-consumer services. Of course, that calls into question those two companies' long-term viability as consumer-facing brands; they would be solely reliant on their broadcast and cable TV channels in an era where linear channels are fading and streaming continues to rise.

    As hybrid cable/streaming services, Showtime and Starz both have decent-sized subscriber bases in the 25-28 million range but most of those are still on cable, making them somewhat vulnerable as Americans continue to cut the cord. But they could probably at least survive, if not thrive, as-is for several more years as US premium services that license their content to bigger players in foreign markets. Their prospects would improve if they were merged, a move that Showtime parent CBS perhaps had in mind when they tendered an unsolicited bid to purchase Starz a couple years ago.
     
  16. Steveknj

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    I think NBC/U (Peacock) will eventually be one of the majors. I think Apple would NEVER compromise and bring lower quality content just to be one of the big boys in this realm. They never did it with any other product so I can't see them doing it here. Either they will stand on their own terms or they will be happy being a niche service that they can package with iPhones and Macs. I do think Netflix is going to be a prime target for someone. It's not owned by one of the big boys and there's certainly a chance someone like Viacom or NBC/U could snap them up. Or it could be Netflix snagging one of them. We'll see. But consolidation will not be good for us. You mention that there will always be room for niche and I think that's the case until they grow enough for one of the big boys to want them.

    BTW, isn't Showtime owned by Viacom? I wonder how soon it winds up part of Paramount+ or perhaps they rebrand it again to Showtime+?
     
  17. NashGuy

    NashGuy Well-Known Member

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    Eh, I don't think NBCU's Peacock is hitting it out of the park so far and it's under pressure to prove itself in the next year or so, I'd say. It could potentially become more attractive in the future. Right now, Universal has an exclusive longstanding deal in place with HBO for the pay-1 window for their movies. That deal expires at the end of this year, but will NBCU forego another lucrative licensing deal (whether with HBO Max, Netflix, or whomever) in order to keep their post-'21 theatrical releases exclusive to Peacock? Meanwhile, you can still watch all NBC shows next-day on both Hulu and Peacock. It's unclear whether that will remain in place until 2022 or 2024. Anyhow, at some point in the future, current NBC shows will leave Hulu and become exclusive to Peacock. But in the meantime, you don't need Peacock for current NBC shows and Peacock isn't delivering any recent movies. Peacock has a few originals but it's mainly a lot of old shows and movies. The Office is really it's main attraction. If you're getting Peacock Premium free with your TV or broadband service from Comcast or Cox, then fine. But for $5/mo, it seems underwhelming in comparison with Hulu at $6/mo.

    Yes, Showtime was part of CBS and now part of ViacomCBS. The tricky part of trying to integrate Showtime into something larger is the same problem Warner faced with moving from HBO (and its HBO Go and Now apps) to the larger HBO Max -- they'd need to renegotiate all the current cable and streaming distribution contracts in place for Showtime (as Warner did for HBO), so that any subscription to Showtime would include access to the bigger Paramount+ (or "Showtime+") streaming app, which would include all of Showtime (which frankly has a pretty small library) plus a lot more.

    So in this scenario, the Paramount+ app would replace the existing Showtime and Showtime Anytime apps (just as the HBO Max app replaced the HBO Now and HBO Go apps). But given the realties of the competition in the streaming space, I don't think they could raise the price much, if any, if they really want to grow the subscriber base. Paramount+ Premium (ad-free) is $10/mo while Showtime (always ad-free) costs $11-12/mo, depending where you buy it. Even if you got both together in a combined app and it was all priced at $12/mo all ad-free, I question how competitive it would be against Netflix at $13, the Disney bundle (Disney+, Hulu and ESPN+, the latter two with ads) at $14, and HBO Max (ad-free) at $15. And of course a lot of folks are getting the huge Prime Video library thrown in with a Prime membership they keep anyway.

    To really offer the amount and range of quality content that could make it a serious player that could scale up in the US and abroad vs. Netflix, Disney, etc., I think you'd need to see a service that combines the catalogs of Peacock Premium, Paramount+, Showtime, and maybe Starz and AMC+ as well. Imagine if ViacomCBS bought Lionsgate, with its studio, content library and Starz, then folded Starz into Showtime. Meanwhile, NBCU bought AMC Networks. Then ViacomCBS and NBCU launched a joint venture streaming service that would have the exclusive pay-1 TV window for films from Universal, Paramount and Lionsgate studios, plus a lot of their back catalog movies. It would be the exclusive streaming home of Showtime (which would include Starz content at that point) and also have its own line of exclusive streaming originals (i.e. the combination of what are now Peacock Originals and Paramount+ originals) and certain sports exclusives. And it would feature same or next-day access to current shows on NBC and CBS. Plus all the stuff now offered in AMC+ (which, like Peacock and Paramount+, would cease to exist as its own separate service). Plus have lots of back seasons of various shows from the Viacom and NBCU cable networks.

    Which is a lot of content! Price that super-service at maybe $7/mo with ads and $13/mo ad-free and *maybe* it could fight its way to being a US and global streaming service that's competitive with the current big 4. (They would of course raise the prices later but need a low price now and the willingness to lose money on it for awhile.)

    But time is of the essence. Consumer habits are gelling and it's really hard to play catch-up. Households will only tend to keep a few subscriptions at a time and most won't bother juggling them (or will tire of doing so). Yesterday's deal to form WarnerDiscovery means the window is closing faster for the remaining players to either consolidate and go big, or fold and go home (i.e. stick with traditional TV and license their content to third-party services for streaming).
     
    Last edited: May 18, 2021
  18. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Gold Club DBSTalk Club

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    Reading the agreement would be helpful. The WarnerMedia Discovery merger is a stock deal. The stockholders in the new combined company will be comprised of the stockholders of AT&T and Discovery. AT&T stockholders will get 71% ownership of the merged company and then said company will operate separately from AT&T. AT&T gets a boat load of money ($43 billion) including transfer of WarnerMedia debt to the new company.

    Or as the press release put it: "combine WarnerMedia’s premium entertainment, sports and news assets with Discovery’s leading nonfiction and international entertainment and sports businesses to create a premier, standalone global entertainment company."
     
  19. NashGuy

    NashGuy Well-Known Member

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    Hmm, are you saying that current AT&T stockholders will be issued shares in the new WarnerDiscovery stock? I hadn't seen that explicitly stated in any of the news stories. My read was that the AT&T corporation would itself own 71% of the new company's equity (which would be reflected in the value of AT&T's stock price) with the other 29% of equity owned by current Discovery stockholders, i.e. they would trade their current Discovery shares for WarnerDiscovery shares.
     
  20. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Gold Club DBSTalk Club

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    The deal was filed with the SEC (33 pages). TLDR: That is what press releases are for ...

    "Under the terms of the agreement, which is structured as an all-stock, Reverse Morris Trust transaction, AT&T would receive $43 billion (subject to adjustment) in a combination of 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 Directors of both AT&T and Discovery have approved the transaction."

    One correction to my previous post - The $43 billion includes the debt transferred.
     

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