Telecom Streaming Out Of Service

Michael Hedges May 19, 2021 Follow on Twitter

Phone company jokes have never gone out of vogue. Long represented as that anonymous voice on the line at dinner time demanding payment for a bill already paid or the customer service line that’s always out of service, the phone company is a model irritation. Now called telecoms, the old habits never fade. Nobody, however, laughs about the money they make.

Giant American telecom AT&T finally admitted, only figuratively, its huge mistake trying to bend big media company Time Warner to heel. The name was changed to WarnerMedia in 2018 when it became a subsidiary costing AT&T US$85.4 billion. Within a year a new streaming video platform HBO Max was announced but it didn’t appear until 2020. This past week AT&T began unraveling from WarnerMedia, creating a new company with Discovery, Inc.

During this short news cycle, US media watchers had quite a time digging up the details, from significant to arcane. Negotiations between Discovery president and chief executive David Zaslav and AT&T chief executive John Stankey transpired over six months very secretly, reported the New York Times (May 17). AT&T shareholders will hold a 71% stake in the new company, Discovery shareholders taking the remaining 29%. Mr. Zaslav will become chief executive bringing with him several Discovery executives but not current WarnerMedia chief executive Jason Kilar, who “angered Hollywood royalty,” offered the Wall Street Journal (May 15).

AT&T’s new media strategy is being described as “getting out,” as NPR media correspondent David Folkenflik mused (May 17). It will retreat to its former, more comfortable self, investing in 5G and broadband while focusing on debt reduction. The new company will likely be called WarnerDiscovery and announced next week, reported CNBC (May 18), and will have an enterprise value of US$132 billion, added the Financial Times (May 17), including US$56 billion in debt. All further hype about synergies between distribution (telecoms) and content (media producers) has now ended.

Streaming and the future thereof will remain in headlines about the deal. Both WarnerMedia and Discovery have streaming services; HBO Max and Discovery+, respectively. HBO Max offers top quality, well-reviewed series and feature films. Discovery+ loads in unscripted reality TV shows plus the Animal Planet shows that keep happy the cable operators. Eventually, there will be a single WarnerDiscovery streaming brand, most likely a bouquet of brand extensions. Rumored leading candidate for the job leading that project is DAZN chief executive Kevin Mayer. DAZN is a fire-cracker hot all-sports streamer. Mr. Mayer is pals with Mr. Zaslav. Discovery holds sports rights galore. Mr. Zaslav is also pals with Jeff Zucker, currently chairman of WarnerMedia News and Sports. They worked together at NBC. In February Mr. Zucker indicated his intention to leave that position. He was reportedly in those secret discussions with Mr. Zaslav about the deal, which may or may not have included Mr. Stankey.

While a streaming video business to compete with Amazon, Disney and Netflix is on the minds of many, the end game for the new WarnerDiscovery company is purely financial. And it has been in the blood since the Time Warner days. The single-class shareholding is a beauty for investors, the main reason the company that ended up as WarnerMedia traversed so many takeovers and acquisitions. There are no vested owners with special controlling votes, like the Murdoch family grip on Fox Corp and News Corp.

John Malone, the original “cable guy,” is Discovery’s major shareholder. With the Newhouse family investment fund Advance, they control 45% of the shareholder vote. Both signed off on the deal. Indeed, Mr. Malone championed it. He will have a board seat with the new company but has relinquished special share class voting.

See also...

• Hot Topics - Media Mergers and Acquisitions

• Hot Topics - WarnerMedia

• Hot Topics - Streaming Media