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Discovery (DISCA) to Merge Discovery Plus and WarnerMedia's HBO Max

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Discovery announced that it would merge its streaming service Discovery+ with WarnerMedia’s HBO Max, after the former closes the acquisition of WarnerMedia from AT&T (T - Free Report) .

In May 2021, Discovery had announced a definitive agreement to combine WarnerMedia’s premium entertainment, sports and news assets with Discovery’s leading nonfiction and international entertainment and sports businesses to create a premier, standalone global entertainment company.

Post completion of the deal, AT&T will receive $43 billion in a combination of cash and debt securities and will own 71% of the new entity, while Discovery will own the remainder. The deal, which is expected to close early in the second quarter of 2022, was ratified by Discovery shareholders on Mar 11, 2022.

In June 2021, Discovery had announced the new name of the proposed standalone global entertainment company that will emerge from the merger to be Warner Bros. Discovery.

Since then, there has been much speculation on whether the company will continue to operate Discovery+ and HBO Max as separate independent identities.

Recently, Discovery CFO Gunnar Wiedenfels put an end to all the speculations at the Deutsche Bank Annual Media, Internet & Telecom Conference, confirming that the two services, instead of being offered as a bundle, will be combined.

Discovery, Inc. Price and Consensus

 

Discovery, Inc. Price and Consensus

Discovery, Inc. price-consensus-chart | Discovery, Inc. Quote

 

Merger to Ramp Up Streaming Competition

Notably, video streaming has been one of the few industries that have 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.

The robust demand for media content has not only benefited major players such as Netflix (NFLX - Free Report) and Amazon (AMZN - Free Report) but also the likes of newly-released services – Disney+, NBCUniversal’s Peacock and Apple TV+.

The WarnerMedia-Discovery deal will intensify competition in the streaming market space, currently dominated by Netflix, Amazon and Disney+, driven by its solid content portfolio as well as increased spending capabilities.

The merger company is expected to generate DTC revenues of more than $15 billion in 2023. Moreover, cost synergies are expected to cross $3 billion per year.

With the completion of the merger, Warner Bros. Discovery will have a library of more than 200,000 hours of content, including series and films, 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.

Currently, Discovery+ has more than 22 million global subscribers, while HBO has 73.8 million subscribers globally.

At present, Discovery holds a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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