In an hour-long press briefing, Discovery CEO David Zaslav and AT&T CEO John Stankey outlined plans for the companies’ $43 billion merger.
“We’re going to be one company,” Zaslav said. “One company, one culture, one mission.” As to the timing of the deal, Stankey said he felt the entertainment portfolio had achieved “escape velocity” in recent months. Given the broader objectives of AT&T, which has been investing in 5G and other technology for its broadband and wireless networks, he added, “It became clear to me that we were going to need a different capital structure.”
The transaction, which burst into view as a strong likelihood just one day ago, started to take shape earlier this year during covert meetings between Zaslav and Stankey in New York, the execs said. A text exchange, Zaslav recalled, led to “a two-hour conversation about the future of media.” Many other conversations followed.
Related Stories
Under the deal, AT&T shareholders will own 71% of the combined entity and Discovery’s the remaining 29%, with 2023 revenue projected at $52 billion. Joining forces are entertainment and media brands like HBO, HGTV, Warner Bros, TLC, TNT, TBS and Food Network, with a goal of creating a larger-scale player capable of challenging Netflix. Zaslav will run the company, whose official name will be revealed in the coming days.
Watch on Deadline
The makeup of the executive suite is a looming question. Asked twice about the status of WarnerMedia CEO Jason Kilar in the new configuration, Zaslav and Stankey said he remains in his current position. But they didn’t offer much more of a vote of confidence than that. Kilar, a former Amazon exec and Hulu CEO, took the reins at WarnerMedia in May 2020 and made a series of dramatic moves, including a major restructuring last summer, designed to position WarnerMedia more completely for the digital age.
“David’s got decisions he’s gotta make across a broad cross-section of how he wants to organize the business and who will be in what roles moving forward in this transition period,” Stankey said. Zaslav noted that he was Kilar’s colleague at NBC during his run as a sales exec, as Kilar was running Hulu, initially a co-venture backed by NBC and Fox. “Jason is a fantastic talent,” Zaslav said.
There will be $3 billion in synergies from the deal, Zaslav said. He noted that after Discovery bought Scripps Networks Interactive for $14.6 billion in 2018, the management team that eventually took shape drew from both companies’ ranks. “It was a real mixture, like half-and-half,” Zaslav said. With the new entity, he continued, “We’re going to get really aggressive and drive productivity.”
While there will be “great synergy in finding the best and the brightest people,” Zaslav added, “the objective is, attack that business with productivity and talent, great people and hard work. But then spend more money on content.” The budget will start at $20 billion, he said, “and we want to invest in more.”
Anytime words like “synergy” or “efficiency” are bandied about, layoffs are usually around the corner. There was no discussion of cuts, but an expanded portfolio of cable networks and a consolidated streaming operation would seem to offer opportunities to streamline in areas like distribution, sales, affiliate, product and elsewhere.
CNN will remain in the corporate fold, Zaslav said, and the company plans to be “the world leader in news.” Ever since AT&T proposed buying Time Warner in 2016, the fate of the news network has been a question in Washington and on Wall Street. Former President Donald Trump has long tangled with the network and during his administration the Department of Justice filed an antitrust suit to try to block the Time Warner deal. A federal judge rejected the complaint, and an appellate court supported the ruling.
Jeff Zucker, who has run CNN for nearly a decade, has planned to step down at the end of the year. Given his ties to Zaslav (the two were another pair who connected at NBC), there is a chance he could extend his run at the new company. That scenario was not discounted by Zaslav and Stankey, but they didn’t offer anything definitive on that front.
In his introductory remarks, Zaslav acknowledged the Warner Brother by name, harking back to the origins of the company nearly a century ago. That gesture pointed to a significant piece of real estate Zaslav will now oversee (from an office on the Warner Bros lot, he announced): the film operations at Warner Bros. Left unaddressed during the hour with reporters was the company’s film strategy and plans to address relationships with talent and theater owners bruised by the decision by Kilar to release movies day-and-date on HBO Max and in theaters. The plan has goosed HBO Max subscriptions and helped generate sizable box office, but has clouded the outlook on where theatrical windows will settle.
Talent relationships, Zaslav acknowledged, must be a key priority as he takes control. “I will be anywhere in the world the creatives are, to strive to create the best creative culture,” he said. “We want our company to be the place where people that want creativity, they want flexibility, they want stories, they will come to us.”
As to streaming strategy, both partners have recently entered the direct-to-consumer space in significant ways, with Discovery+ and HBO Max. Discovery+, which launched last January, has reached about 15 million global subscribers. HBO Max, which arrived in May 2020, has 44.2 million subscribers when combined with traditional HBO. The majority of the subscribers are on the traditional linear side, but the ratio is expected to flip in the coming year as streaming takes the focus.
The execs were non-committal as to whether they would combine the services or bundle them as separate products. Zaslav said all options would be explored. Disney has seen success by bundling Disney+, ESPN+ and Hulu in a single offering. “We’ll see over the next few years as we learn more about what consumers want and how they want it,” he said.
Kilar wanted to be known as the disruptor. He certainly disrupted his own career!
Hulu alumni…. bye bye!!
“ONE COMPANY, ONE CULTURE, ONE MISSION”??? Oh my goodness. They said EXACTLY the same ‘BS’ trying to bring together the famously successful squabbling siblings of WB, Turner and HBO. AT&T have no shame and no idea. This is sickening stuff. From the team that brought you the destruction of the best movie and TV COMPANIES, with defined CULTURES full of loyal creative and staff, that had a MISSION of making great content and monetizing it for the best revenue in the industry … comes a total cluster-F*&k. How many times does it have to be said. Telcos and Entertainment do NOT mix. Where are the all-seeing analysts now? Where is the questioning of the decision by the Phone Company to blast apart an organisation that was delivering massive cash and record ROI based on a sound, professional and passionate creative team and industry-leading distribution business? AT&T shareholders REVOLT! NEVER was ‘MAX’ (let’s be honest, it was always going to end up being called ‘Max’) EVER going to return the same kind of money, especially outside the USA. Billions in distribution revenue, relationships, expetise, insight … blown away like the hundreds and hundreds of staff “let go” by these crack decision makers. What a JOKE. Maybe a better idea, might have been to solidify the creative and business expertise of WB, Turner and HBO, and make them the undisputed Kings Of Content Creation? Then all the hungry streaming (and remaining linear) platforms from every corner of the globe, could come to the Mount and partake of the ‘Friend To All, Favor To None’ method, buying the best content possible in a free-market with established rules and understanding? This would ensure content was monetized for it’s true value, participants returned an investment worth the effort/risk, and talent rewarded for their skills. What a simple idea … make great content for everyone and be UNDENYABLE. And rather than ‘let go’ staff, it’s highly likely that more people would be employed, new talent nurtured and allowed to shine, with the creative effort curated. The best Leadership was already in place. The Teams were at the top of their game. Anyway, I have to go now … the phone is ringing … my Lawyer ready to make a claim for me being wrongfully being “let go”.
Discovery found a lifeboat. Without this deal they were going to head south and they knew it.
I mean… More people watch 90 Day Fiancé than all the award shows combined.
NBCUniversal and ViacomCBS are going to need scale. Disney and Netflix is the ones that are already complete.
Where does all this leave Ann Sarnoff Doesn’t Jason Kilar report to her?