AT&T to shed HBO, Warner Bros., and CNN in deal with Discovery

May 18, 2021

AT&T is dialing down its media interests. The wireless carrier—which thundered its way into the media business three years ago with grand visions of streaming video to millions of its customers’ cellphones—has suddenly announced that it wants a do-over: It has agreed to spin off its WarnerMedia group and merge it with a rival programmer, Discovery, the companies announced on Monday, May 17.

Indeed, according a report by The New York Times, the transaction will combine HBO, Warner Bros. studios, CNN and several other cable networks with a host of reality-based cable channels from Discovery, including Oprah Winfrey’s OWN, HGTV, The Food Network and Animal Planet. The new company will be bigger than Netflix or NBCUniversal.

The new company will join together two of the largest media businesses in the country. AT&T’s WarnerMedia group includes the sports-heavy cable networks TNT and TBS. In addition to Discovery’s strong lineup of reality-based cable channels, the company has a large international sports business.

The merger would also be a significant about-face for AT&T, a telecommunications giant better known for servicing fiber lines and cell towers than producing entertainment and courting Hollywood. Industry experts questioned AT&T’s daring $85 billion purchase of Time Warner at a time when cord-cutting was only accelerating. The spinoff indicates a failed acquisition strategy, the Times notes.

As part of the deal, AT&T will be able to shed some of its debt and get some cash and bonds that altogether would amount to $43 billion. AT&T shareholders will own 71% of the new business, with Discovery investors owning the rest.

The new company will be run by David Zaslav, 60, a media veteran and the longtime chief executive of Discovery, casting into doubt the future (yet again) of the top ranks of WarnerMedia. Jason Kilar, 50, who was hired to run AT&T’s media group only last year, could lose his job.

“Jason is a fantastic talent,” Zaslav said on a call with reporters following the announcement. He also praised other executives within WarnerMedia, including Toby Emmerich, the head of the film division, Casey Bloys, who runs HBO, and Jeff Zucker, the leader of CNN.. Zucker and. Zaslav are also longtime golfing buddies.

The companies said they expected the deal, which must be approved by Discovery shareholders and regulators, to be finalized in the middle of next year. The companies anticipate they will cut annual costs by $3 billion as a result of the transaction.

Research contact: @nytimes

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