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What's going on?

US telecoms giant AT&T agreed on Monday to merge its WarnerMedia content business with rival Discovery, in a bid to create a brand new king of the media jungle.

What does this mean?

AT&T only bought WarnerMedia – home to HBO, CNN, and Warner Bros. Entertainment – three years ago. But it’s already planning to spin off the unit into a standalone company which – combined with Discovery’s sports, science, and reality TV empire – could be worth up to $150 billion.



WarnerMedia and Discovery currently have complementary content footprints, and the combined business – 71% of which would be owned by AT&T and 29% of which by Discovery’s current shareholders – would control everything from Superman movies to European Olympics coverage. So if the deal ends up getting the go-ahead from regulators, it’d mean some potent competition for the likes of Disney+ and Netflix…

Why should I care?

The bigger picture: Be skeptical of the hype.


If you think AT&T’s ownership of WarnerMedia sounds short-lived, you’re not wrong. But big merger deals don’t always go to plan, which is why investors – like Discovery’s on Monday – often send their shares down on the back of the announcement (tweet this). In fact, research from management consultancy McKinsey suggests that a lot of small linkups over a longer period tend to add more value than one blockbuster merger.



Zooming out: There are bigger fish to fry.


Netflix may have 208 million subscribers, but AT&T and Discovery’s flagship subscription services – Discovery+ and HBO Max – both grew faster than the streaming frontrunner last quarter. Still, even if these two do join forces, it’ll likely be a long time before they feel confident enough to start cranking up prices on their combined 59 million customers – and even longer before they start turning a profit like the OG streaming platform.

Originally posted as part of the Finimize daily email.

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