Media Mergers and Acquisitions

AT&T pulls the handbrake on Time Warner turn as competition bites

By John Glenday | Reporter

May 17, 2021 | 5 min read

AT&T is rethinking its Time Warner (now WarnerMedia) strategy just three years after shelling out $85bn for the business – by seeking a merger between its assets, including HBO Max, with Discovery to form a new streaming giant.

WarnerMedia

AT&T appears set to offload most of its media assets, much to the chagrin of industry watchers

Currently languishing a distant third behind titans Netflix and Disney, AT&T is betting big on scale to propel it to success, leaving other contenders such as Amazon, Apple and ViacomCBS in its dust.

Why the sudden shift in strategy?

  • The home entertainment business is in the throes of frenetic change, with media firms piling into streaming in a desperate bid to emulate the rampant success of Netflix.

  • What worked well for one all-encompassing service, however, isn’t likely to continue as the sector fractures between multiple competing providers from Disney+ to HBO Max, making consolidation an attractive option with consumers unlikely to shell out for more than three or four separate streaming services at most.

  • AT&T chief John Stankey views Discovery as his ticket into this top-tier club, perhaps guided by the runaway success of outsized monster mash-up Godzilla Vs Kong at the box office.

  • This will see AT&T’s entertainment assets spun off into a new standalone venture with Discovery.

Why Discovery?

  • Discovery+ benefits from complimentary content, particularly unscripted shows such as Guy Fieri’s Diners, Drive-Ins And Dives and 90 Day Fiancé, which reaches audiences new to HBO Max.

  • This niche has proven to be one of the secrets to Netflix’s rampant success, with formats such as The Circle and Too Hot To Handle being lapped up by lockdown viewers.

  • For its part, Discovery can swim with the big fish by teaming up with another mid-size contender to form a single juggernaut, with the potential to shake up the cozy duopoly of Netflix and Disney.

  • Discovery chief executive David Zaslav is likely to lead the combined entity.

A humbled giant

  • Reaching this promised land, however, will require yet another disruptive restructuring just as AT&T had completed the exhausting transformation of Time Warner into WarnerMedia under the auspices of no less than three separate leaders; Bob Greenblatt, Kevin Tsujihara and Jeff Zucker.

  • It’s also a tacit admission that heady ambitions of establishing a 21st-century media colossus three years ago have failed, with a full-blooded merger between AT&T’s cellphone business, Warner Bros Studio and Turner channels such as CNN proving to be too ungainly.

  • Instead, AT&T appears set to offload most of its media assets, much to the chagrin of industry watchers such as telecommunications analyst Craig Moffett, who said: “What a dismal failure, and what an embarrassing chapter for what was once one of America’s most storied companies.”

  • Following so soon after Disney’s $71bn acquisition of 20th Century Fox, it is further evidence of the dramatic ructions shaking Hollywood to its core as viewing patterns change.

  • Formal confirmation of the Discovery tie-up is expected later today ahead of a request for regulatory approval.

Media Mergers and Acquisitions

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