Three years ago, AT&T bought Time Warner for $85 billion, immediately turning the telecommunications company into one of the biggest media empires in the world. Since then, WarnerMedia’s footprint on the landscape has only gotten bigger and bigger, with HBO Max in particular making huge waves in the streaming war, but AT&T has recently been showing some buyer’s remorse over the deal due to the fact that it’s reportedly in some deep, deep, deep debt. Last summer, there were rumors going around that AT&T was looking to offload Warner Bros. Interactive Entertainment, one of the biggest video game publishers in the entire industry (since it has easy access to the DC Comics and Harry Potter licenses), to make a little cash, and now a new report from Bloomberg says AT&T is already preparing to completely spin off its media business by merging with Discovery to create a new media empire that would be a “formidable competitor” to Netflix and Disney.
This all comes from Bloomberg, which got the scoop from some anonymous “people” who said that the deal could be announced as soon as this week. The idea is that AT&T has “vast media holdings” that could be combined with Discovery’s “reality TV empire” to create a new thing without endangering AT&T’s “core business”—i.e. phone stuff, which has dipped since the Time Warner deal, making it difficult for the company to develop its very expensive new 5G wireless network. Bloomberg says AT&T is “one of the world’s most indebted companies” and has been cutting staff and selling off assets lately (including DirecTV and Crunchyroll, a stake in Hulu, and some offices), so this move could be a good way to just cut the head off of something it never seemed to want in the first place.
High-level corporate moves like this aren’t always good for us regular people, though, so it’s unclear what kind of impact this would have outside of AT&T bottom line. The Bloomberg story points out that AT&T has given subscribers access to HBO Max for free, using it as an incentive to not ditch it for other wireless and internet providers, so that would presumably end if AT&T drops its connection to Time Warner. It’s also unclear if the whole HBO Max/Time Warner empire would go together, especially if someone else comes in with an acquisition offer, which could mean HBO Max losing its access to the Warner Bros. library. The ideal version of this would probably be that AT&T keeps giving subscribers free access to HBO Max, HBO Max merges with Discovery+, and then the 99 percent—emboldened by having Game Of Thrones and Guy’s Grocery Games on the same platform—rises up to eat the rich, but we’ll have to wait for this deal to actually go down before seeing if any of that happens.
Update [5/17/2021]: AT&T announced on Monday that it will move forward with the deal. AT&T says it will receive a combined amount of $43 billion in a mix of cash and debt (including WarnerMedia’s retention of certain debt). AT&T shareholders will receive 71% of stock in the new company, while Discovery shareholders will own 29%. In a statement, Discovery President and CEO David Zaslav says, “It is super exciting to combine such historic brands, world class journalism and iconic franchises under one roof and unlock so much value and opportunity.”