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Discovery-WarnerMedia Merger to Rev Up Streaming Competition
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Discovery is set to merge with AT&T (T - Free Report) -division WarnerMedia in a deal that will intensify competition in the streaming market space, currently dominated by Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) and The Walt Disney’s (DIS - Free Report) Disney+.
Markedly, video streaming has been one of the few industries that has benefited from the coronavirus-induced disruptions. Lockdowns and movement restrictions forced a majority of the global population to stay at home, ramping up demand for media content.
According to a Motion Picture Association report, subscriptions to online video services reached 1.1 billion globally in 2020, up 26% year over year. In the United States, subscriptions reached 308.6 million, up 32% over 2019 levels.
The robust demand for media content has not only benefited incumbents like Netflix and Amazon but also the likes of newly-released services – Disney+, NBCUniversal’s Peacock, Apple TV+ and WarnerMedia’s HBO Max.
For instance, Netflix added 37 million paid subscribers in 2020 that represented a 31% increase over 2019’s 28 million paid net additions. Disney+ garnered 70.1 million subscribers between March 28, 2020, and April 3, 2021. Moreover, within a year of its launch, Peacock had 42 million sign-ups at the end of first-quarter 2021.
Year-to-Date Performance
HBO Max & Discovery: A Solid Combination
The pandemic has also been a blessing in disguise for WarnerMedia’s HBO Max. In the United States, AT&T gained more than 11 million domestic HBO Max and HBO subscribers over the last 12 months. This Zacks Rank #3 (Hold) company expects 120-150 million HBO Max and HBO subscribers worldwide by the end of 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AT&T is likely to expand HBO Max in 39 international markets by late June and another 21 markets in the second half of 2021.
Discovery, in the meanwhile, boasts a strong non-fiction content portfolio. This Zacks Rank #4 (Sell) company is benefiting from solid viewership of multiple channels, including Discovery Channel, Animal Planet, Food Network, HGTV, MotorTrend, Science, TLC, ID, Oprah, Eurosport, the Cooking Channel and UKTV Lifestyle.
Moreover, discovery+ is off to an impressive start. Discovery ended the first quarter with 13 million paying direct-to-consumer (DTC) subscribers. It launched discovery+ on Comcast Xfinity and Amazon Prime Video Channels in the United States, Starzplay in MENA, and Samsung Smart TVs and Amazon Fire TV devices in the United Kingdom and Ireland. This is expected to drive top-line growth over the long haul.
The combined WarnerMedia-Discovery is expected to generate DTC revenues of more than $15 billion in 2023. Moreover, cost synergies are expected to cross $3 billion per year.
Markedly, the combined company is likely to have more than 200K hours of video content along with premium sports rights in the United States, Europe and Latin America. The service will be available in more than 220 countries and 50 languages.
The robust portfolio of sports content is expected to challenge Disney’s ESPN and ESPN+ portfolio. Disney, which also has a Zacks Rank #3, is focused on sports streaming, particularly Live Sports. For instance, ESPN+ offers tournaments like UFC Lightweight Championship, Major League Baseball (MLB), National Hockey League (NHL), Major League Soccer, Grand Slam tennis and Italy’s Serie A soccer.
Moreover, an extensive collection of exclusive original programs and the most sought-after shows from WarnerMedia’s vast portfolio of brands and libraries are expected to boost competitive prowess against the likes of Netflix, Amazon prime video, Peacock and Apple TV+.
Merger to Drive Growth Post Coronavirus
The coronavirus-induced spike in the usage of streaming service is expected to drop once a majority of people get vaccinated and restrictions are lifted globally.
This was reflected in Netflix’s first-quarter 2021 results as subscriber addition rate slowed down significantly. The Zacks Rank #3 company added 3.98 million paid subscribers globally against the addition of 15.77 million in the year-ago quarter and also missed its guidance of 6 million paid-subscriber addition.
However, the coronavirus-induced change in consumer behavior and solid original content offerings from the streaming services are expected to boost market growth. Per Technavio, the global online streaming services market is expected to see a CAGR of 18% over 2020-2024 to reach $149.96 billion at the end of the period.
Moreover, spending on content is expected to jump significantly. Netflix plans to spend more than $17 billion in cash on content in 2021. Disney is expected to spend between $8 billion and $9 billion on Disney+ content by 2024.
Meanwhile, WarnerMedia is likely to spend between $1.5 billion and $2 billion on content on HBO Max in its first year. It is anticipated to spend $1 billion in each following year.
The WarrnerMedia-Discovery combination is expected to benefit from its solid content portfolio as well as increased spending power. The combined company is expected to generate revenues of more than $52 billion and adjusted EBITDA of roughly $14 billion in 2023.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Image: Bigstock
Discovery-WarnerMedia Merger to Rev Up Streaming Competition
Discovery is set to merge with AT&T (T - Free Report) -division WarnerMedia in a deal that will intensify competition in the streaming market space, currently dominated by Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) and The Walt Disney’s (DIS - Free Report) Disney+.
Markedly, video streaming has been one of the few industries that has benefited from the coronavirus-induced disruptions. Lockdowns and movement restrictions forced a majority of the global population to stay at home, ramping up demand for media content.
According to a Motion Picture Association report, subscriptions to online video services reached 1.1 billion globally in 2020, up 26% year over year. In the United States, subscriptions reached 308.6 million, up 32% over 2019 levels.
The robust demand for media content has not only benefited incumbents like Netflix and Amazon but also the likes of newly-released services – Disney+, NBCUniversal’s Peacock, Apple TV+ and WarnerMedia’s HBO Max.
For instance, Netflix added 37 million paid subscribers in 2020 that represented a 31% increase over 2019’s 28 million paid net additions. Disney+ garnered 70.1 million subscribers between March 28, 2020, and April 3, 2021. Moreover, within a year of its launch, Peacock had 42 million sign-ups at the end of first-quarter 2021.
Year-to-Date Performance
HBO Max & Discovery: A Solid Combination
The pandemic has also been a blessing in disguise for WarnerMedia’s HBO Max. In the United States, AT&T gained more than 11 million domestic HBO Max and HBO subscribers over the last 12 months. This Zacks Rank #3 (Hold) company expects 120-150 million HBO Max and HBO subscribers worldwide by the end of 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AT&T is likely to expand HBO Max in 39 international markets by late June and another 21 markets in the second half of 2021.
Discovery, in the meanwhile, boasts a strong non-fiction content portfolio. This Zacks Rank #4 (Sell) company is benefiting from solid viewership of multiple channels, including Discovery Channel, Animal Planet, Food Network, HGTV, MotorTrend, Science, TLC, ID, Oprah, Eurosport, the Cooking Channel and UKTV Lifestyle.
Moreover, discovery+ is off to an impressive start. Discovery ended the first quarter with 13 million paying direct-to-consumer (DTC) subscribers. It launched discovery+ on Comcast Xfinity and Amazon Prime Video Channels in the United States, Starzplay in MENA, and Samsung Smart TVs and Amazon Fire TV devices in the United Kingdom and Ireland. This is expected to drive top-line growth over the long haul.
The combined WarnerMedia-Discovery is expected to generate DTC revenues of more than $15 billion in 2023. Moreover, cost synergies are expected to cross $3 billion per year.
Markedly, the combined company is likely to have more than 200K hours of video content along with premium sports rights in the United States, Europe and Latin America. The service will be available in more than 220 countries and 50 languages.
The robust portfolio of sports content is expected to challenge Disney’s ESPN and ESPN+ portfolio. Disney, which also has a Zacks Rank #3, is focused on sports streaming, particularly Live Sports. For instance, ESPN+ offers tournaments like UFC Lightweight Championship, Major League Baseball (MLB), National Hockey League (NHL), Major League Soccer, Grand Slam tennis and Italy’s Serie A soccer.
Moreover, an extensive collection of exclusive original programs and the most sought-after shows from WarnerMedia’s vast portfolio of brands and libraries are expected to boost competitive prowess against the likes of Netflix, Amazon prime video, Peacock and Apple TV+.
Merger to Drive Growth Post Coronavirus
The coronavirus-induced spike in the usage of streaming service is expected to drop once a majority of people get vaccinated and restrictions are lifted globally.
This was reflected in Netflix’s first-quarter 2021 results as subscriber addition rate slowed down significantly. The Zacks Rank #3 company added 3.98 million paid subscribers globally against the addition of 15.77 million in the year-ago quarter and also missed its guidance of 6 million paid-subscriber addition.
However, the coronavirus-induced change in consumer behavior and solid original content offerings from the streaming services are expected to boost market growth. Per Technavio, the global online streaming services market is expected to see a CAGR of 18% over 2020-2024 to reach $149.96 billion at the end of the period.
Moreover, spending on content is expected to jump significantly. Netflix plans to spend more than $17 billion in cash on content in 2021. Disney is expected to spend between $8 billion and $9 billion on Disney+ content by 2024.
Meanwhile, WarnerMedia is likely to spend between $1.5 billion and $2 billion on content on HBO Max in its first year. It is anticipated to spend $1 billion in each following year.
The WarrnerMedia-Discovery combination is expected to benefit from its solid content portfolio as well as increased spending power. The combined company is expected to generate revenues of more than $52 billion and adjusted EBITDA of roughly $14 billion in 2023.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>