Does the Discovery-AT&T Warner Media merger make sense?

The potential tie-up of the cable giants could be announced soon, say reports.


MUMBAI: In one word. Yes. At least it gives them a chance in hell to play catch up with the well-muscled and well-entrenched rivals like Netflix, Disney, Amazon Prime Video, and Apple TV in the streaming race. While Netflix announced 208 million subscribers worldwide in its latest financial meet with investors, Disney declared that it had roped in 108 million subs in just a year and a half of its existence.

As compared to that, Discovery recently disclosed that it had managed to lasso 15 million subscribers to its streaming business, and Warner Media’s HBO Max revealed its sign-ups at 9.7 million. Combining the two – if all subs stay put – gives a total of around 24.7 million. That’s still an ant-like figure compared to the jumbo numbers of Netflix, Disney, and hey even Amazon Prime. Both continued to concentrate on linear TV, and on cable, even as others were laying it out thick on OTT services. Their coming late to the streaming party means they have to work harder to ramp up subs. By teaming up it might be a little easier, but the hard work will need to be put in.

Netflix - when it launched - did to HBO, what HBO did to other cable TV programmers two to three decades ago. The Reed Hastings-led OTT introduced cutting-edge, well-produced and edited, hard storytelling in its series and gave subscribers something to get glued onto almost every month. At an affordable price too as compared to cable TV’s high rates in the US.

Can HBO do a Netflix to Netflix in terms of content in the current streaming world? 

Many think that can be done, but it requires deep pockets as well as a global vision such as that is available aplenty with the Netflix top management. As well as a strong heart to tolerate negative cash flows, take on what some may consider strangulating debt while spending tens of billions of dollars on content, churning out fresh shows o

Fusing Warner with Discovery will definitely give the two a lot more financial ammo as well content. Both are at the top of their game when it comes to their respective genres. Warner Media has dramas, series, movies in the case of HBO, TNT, TBS, and Warner Bros and kids programming in Cartoon Network; news in CNN, and sports in Turner Sports. Discovery has gold standard factual programming, along with its live sports lineup in Eurosport, real estate shows in HGTV and lifestyle programming in TLC, and food competitions in the Food Network.

If the merger does see the light of day, the question about who will lead the operation will need to be answered. Warner Media’s Jason Kilar has shown he has the hunger; Discovery boss David Zaslav is no chicken; he’s a mean rooster and is extremely ambitious.  Observers believe that AT&T is likely to call the shots; so Kilar will get a shoo-in as head, while Zaslav will get a very rich golden handshake. Others however point out that the latter has the confidence of media baron John Malone who  controls about 30 per cent of Discovery’s equity and it’s quite likely that his word will carry weight.  This means Zaslav and Kilar might both be accommodated in the new organization.

Of course, the merger will mean the joint entity  will boast of a neat bundle of offerings for viewers – covering everything from sports to drama to factual to kids to movies to reality. Scale is crucial in streaming service offerings, and that can be achieved by offering the Discovery Warner service at an extremely appealing price, in keeping with what rivals are charging. Discovery Plus has a price tag of $6.99 while HBO Max is available at $15. This is why the latter has remained as a niche offering attracting a thin sliver of viewers as compared to Netflix and Disney.

In the Indian context, both Discovery and Warner Media, have kind of been left behind in the broadcast sweepstakes as compared to the mainline TV broadcasters and streamers. Both have kids channels, while HBO and WB channels have been wound up in the country. Discovery has its international slate of channels while it also has localised its factual programming. Hence, a merger within India would definitely bring in economies.

Clearly, all that is in the future. Right now the two companies’ boards and management have to decide whether they are going ahead or not. You can’t forget that there was strong talk that Comcast and AT&T were conversing  for a deal between NBC Universal and Warner Media. But that kind of stalled and did not move ahead. Now, Discovery looks to have beaten NBC Universal to the punch. The days ahead will tell us if it results in a knockout or not.

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