A new media giant is emerging

The American telecommunications company AT&T is merging its media business with its competitor Discovery in order to have better chances against competitors like Netflix. It’s an abrupt turn.

AT & T's merger with the media company Discovery is intended to help the group compete against Netflix and Co.

IAnother major merger is taking place in the media industry: the American telecommunications group AT&T announced on Monday that it would merge its film and television division Warner Media with its competitor Discovery. With this alliance, the two companies hope to position themselves better in the increasingly competitive streaming market compared to competitors such as Netflix. Warner Media owns film studios and a range of television activities including the news channel CNN and the pay broadcaster HBO, which is known for shows such as Game of Thrones. The Discovery umbrella includes a number of channels such as HGTV and Food Network that show reality shows, as well as the European sports channel Eurosport. Beyond these traditional television channels, both companies have also recently launched Netflix-style online video services.

For AT&T, the now announced transaction is tantamount to an abrupt strategic turnaround. The corporation acquired its media business just under three years ago when it paid more than $ 80 billion for Time Warner. He had fought for the takeover for almost two years. The US Department of Justice had filed an antitrust lawsuit to prevent the acquisition. It has been speculated and also suggested by AT&T that the then President Donald Trump could have had a hand in the lawsuit because he disliked the reporting on CNN. In the end, however, the antitrust lawsuit was dismissed and AT&T was able to complete the acquisition.

Industry expansion of a mobile communications company

The idea behind the takeover was to bring media content and its distribution under one roof. AT&T was previously primarily a provider of cellular services, Internet access and television connections. The traditional mobile communications business was showing signs of saturation, however, and a radical change in media consumption was emerging. Online services like Netflix helped drive more and more people to forego television subscriptions and companies like AT&T lost the associated fee income. At the same time, Internet companies such as Google and Facebook were competing with traditional media companies for advertising sales.

Since the acquisition, AT&T has tried to play a stronger role in the streaming business itself. The platform HBO Max was launched almost a year ago and a lot of money is being pumped into it. In order to strengthen HBO Max, the company has even announced that it will show all films here at the same time for theatrical release this year. The service is also gaining more and more subscribers, but it still lags far behind its main competitors. According to the latest available figures, it had around 17 million subscribers at the end of last year. Netflix currently has more than 200 million paying customers around the world, while the Disney + service, owned by the entertainment company Walt Disney and which has been around for around a year and a half, has more than 100 million. Discovery last had 15 million subscribers with its streaming offer.

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The acquisition of Time Warner significantly increased AT & T’s debt burden, and the acquired media business had to compete with the traditional corporate divisions for investment. Just a few months ago, the company spent a double-digit billion amount on the purchase of mobile radio frequencies. In this traditional business, AT&T has recently come under pressure and has lost its previous second place in the American mobile communications market after the competitor T-Mobile USA, which belongs to Deutsche Telekom, strengthened itself with the acquisition of Sprint.

With the transaction that has now been agreed, AT&T is once again concentrating on its core business. In addition, a “pure play” company is to be created that specializes solely in media content, as it was called in a message on Monday. More money could be invested in content. Competitor Verizon has taken a similar path, having announced the sale of the Internet services Yahoo and AOL in the past few months.

AT&T, however, will not withdraw entirely from the media business, rather the company’s shareholders will hold 71 percent of the combined new media group in the future, while the shareholders of Discovery will hold 29 percent. AT&T is also expected to receive a total of $ 43 billion in the course of the transaction, some in cash and some in debt, which will remain with Warner Media. The merger plans were well received on the stock exchange.