May 20, 2021
With a $160 billion debt to repay, telecommunications giant AT&T is looking to take some weight off by starting a new (potentially) lucrative venture—a direct-to-consumer (DTC) streaming service. The (currently unnamed) streaming service will be a joint effort with multinational television company Discovery.
The merger between the two companies was officially announced in a statement on AT&T’s website on May 17. It is expected to be completed in mid-2022.
As a result of the Reverse Morris Trust structure of the merger, the share distribution of the deal favors AT&T, which gets 71%, leaving 29% to Discovery. However, Discovery’s CEO, David Zaslav, will lead the new company expected to have an enterprise value of over $120 billion.
According to revenue projections for 2023, the company will report a revenue of $52 billion and an adjusted EBITDA of about $14 billion. These lucrative revenue projections are likely a response to the companies’ announced annual budget of $20 billion that surpasses streaming giants like Netflix ($17 billion) and Disney+ ($1–$2 billion).
This is not AT&T’s first effort for a streaming service—it launched HBO Max in June 2020. Although the service managed to gain some traction due to its high-quality content, it’s nowhere near as popular as the services provided by the current streaming giants.
Discovery has had some success with its streaming service discovery+ which focuses on home renovation and unscripted cooking shows. However, the service lacks scripted content for more popularity, explaining Discovery’s decision to merge with AT&T.
How Will the Deal Help Both Companies?
This ambitious merger aims to produce the next big streaming service as two companies struggling with their DTC ventures combine their content portfolios and broaden their appeal.
The new company is expected to have rewarding revenue which will help with settling both companies’ debt and promoting further growth.
AT&T hopes to leverage its WarnerMedia segment, which holds successful projects, such as DC Entertainment, Cartoon Network, Adult Swim, Boomerang, Turner Classic Movies, HBO, as well as the numerous successful projects of the Warner Bros. Studio, such as the Harry Potter and Batman franchise.
Discovery boasts programs such as the Discovery Channel, Travel Channel, HGTV, Food Network, TLC, Investigation Discovery, Turbo/Velocity, Animal Planet, and Science Channel, as well as the Oprah Winfrey Network.
Who’s Winning the Streaming Race?
As the cord-cutting trend increases, so does the popularity and audience of streaming services. It’s no secret that streaming services are changing our watching habits and quickly replacing traditional television in the process.
Pioneered by Netflix, streaming has become a desirable business opportunity for many companies. Some have been successful (Disney+, Amazon Prime Video, Hulu), while others were left behind.
Although Netflix still holds first place as the best streaming service around, customer complaints have been increasing over the years, making users eager to try out rival streaming services.
Content is king, and Netflix has been lacking compelling content recently. Customers have reported that they are resorting to using a VPN to view Netflix content available in other countries since they are dissatisfied with what is offered to them. If you are one of those customers, we recommend considering options such as NordVPN or Surfshark.
Some might say that AT&T and Discovery are entering the streaming game too late, but the market is constantly changing, and customers are becoming pickier as more options are offered to them. As long as this new streaming service learns from its competitors’ mistakes and brings something fresh and new to the table, it has a chance.