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What you need to know

  • AT&T's WarnerMedia and Discovery are merging to create a new streaming service.
  • The new streaming service will globally compete.
  • AT&T would get $43 billion in a combination of cash, debt securities, and WarnerMedia's retention of certain debt.

AT&T's WarnerMedia and cable and streaming network Discovery are merging to create a new streaming giant.

AT&T owns HBO Max, which has some of the best shows, and Discovery owns lifestyle TV networks such as HGTV and TLC. AT&T is divesting its media business, WarnerMedia, which is its subsidiary. Under the deal, AT&T would get $43 billion in a combination of cash, debt securities, and WarnerMedia's retention of certain debt. AT&T's shareholders would own 71% of the new company.

The combined portfolio will have over 100 popular and trusted brands in one global portfolio, including HBO, Warner Bros., Discovery, DC Comics, CNN, Cartoon Network, HGTV, Food Network, the Turner Networks, TNT, TBS, Eurosport, Magnolia, TLC, Animal Planet, ID and many more.

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Business Insider reported that the deal would create at least $3 billion in expected "cost synergies" annually for the new company, which could mean job cuts. It also reported that according to SEC filing, AT&T said it expects the new company to have a 2023 revenue of around $52 billion.

The new company, which is expected to close in mid-2022, will "compete globally" by bringing content to subscribers, including HBO Max and the recently launched Discovery+, the press release said.

"The new company will be able to invest in more original content for its streaming services, enhance the programming options across its global linear pay TV and broadcast channels, and offer more innovative video experiences and consumer choices," it added.

The company also plans to invest in creating opportunities for under-represented storytellers and independent creators, the release said.

AT&T has seen a steady growth of HBO Max subscribers and gained almost three million subscribers in Q1 2021. The streaming service now has 9.7 million subscribers, and globally HBO Max and HBO together have about 64 million subscribers. Netflix has 208 million users globally.

Discovery president and CEO David Zaslav will lead the proposed new company, and the new company's board of directors will have 13 members, seven initially appointed by AT&T, including the chairperson of the board; Discovery will initially appoint six members.