Scale and Distribution

In the telly world, a surprise merger between AT&T’s WarnerMedia (CNN, HBO, Warner Brothers, TBS, TNT, DC) and Discovery (Discovery Channel, Animal Planet, TLC, OWN, Eurosport). It’ll result in a business that turns over $52bn with profits of $14bn.

Both are pretty big, and have been focused on rolling out their own streaming platforms – HBO Max and Discovery+ – and trying to compete with Netflix (revenue $25bn), Disney+ (Disney revenue $65bn) and more.

The deal is the result of AT&T realising that media is hard (and want to concentrate on telecoms) and Discovery’s desire to have more scale to compete.

Consumer behaviour is shifting and the TV companies are having to adapt their corporate structures and strategies to keep up.

Disney’s focus on Disney+ has meant killing off many of their broadcast kids channels and axing profitable third-party licensing deals. Netflix has enjoyed much success, with content paid for with debt – they’ve borrowed $16bn to ensure you’ve got something new to watch. It announced at the beginning of the year that it finally had enough subscribers – 200m of them – to pay for its content (and the loan interest) out of its cashflow. Their borrowing gamble seemed to pay off.

Of course for all of the streaming businesses the core elements are owning both the content and the distribution. As many of them have found licensing material is only good whilst the deal lasts.

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