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Creative venture: WarnerMedia
Background info: media-and-entertainment conglomerate, headquartered in New York City, New York, US, North America
Investor/s: Discovery Inc. – on NASDAQ; Advance Publications, Inc.; entrepreneur John Malone
Amount: US$43bn
Seller/s: AT&T Inc – on New York Stock Exchange
Financial lowdown: Debt-laden US telecoms behemoth AT&T is to receive US$43bn in cash and debts when it sells WarnerMedia, its TV-entertainment and sports subsidiary, to a new joint venture led by Discovery, the international factual-TV programming giant. The new company, still without a name, aims to be Netflix’s most aggressive competitor in the global streaming-entertainment space. It will be home to iconic international TV brands like Warner Bros., CNN, HBO Max, Cartoon Network, Discovery, Eurosport, Oprah Winfrey’s OWN and the DC Comics. The deal, which gives AT&T 71% of the new company and Discovery 29%, is set to close mid-2022. With a reported US$150bn valuation, including debts, its nearest rival in terms of entertainment content is The Walt Disney Company, which has a US$307bn valuation. But the new company is forecast to spend US$20bn annually on original and acquired content, compared to Netflix’s current US$17bn. Discovery CEO David Zaslav (also boss of the new joint venture) says a priority will be to make friends with the “creative community”.
Buyer’s gain: Access to a massive streaming-TV library, including 200,000-plus hours of iconic TV programmes, the major rights to the Olympic Games and US sports, and some debts.
Seller’s gain: AT&T is free to focus on reducing debts (it paid a whopping US$85.4bn in 2018 for Time Warner, which became WarnerMedia) and investing in expensive telecoms innovation, like ultra high-speed 5G Internet.
Industry takeaway: Media consolidation is here Big Time; French media giants TF1 and M6 are in joint-venture talks; Amazon (owner of Prime Video and streaming platform Twitch) wants to buy Hollywood icon MGM for a reported US$9bn. The old-media vanguard appears to be running scared towards streaming. Understandably – their current core business in linear-TV is struggling. Yet, they own the true value – the content. And they don’t seem to know how to extract that financial worth. The WarnerMedia-Discovery synergy is set to cut US$3bn in costs in the next two years.  Expect job cuts globally and an overhaul of global sports rights, already in turmoil, thanks to Covid.
Other creative sectors impacted: Film/Video; Live entertainment; Sports
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