AT&T shareholders will hold a 71% stake in the yet-untitled new entity, which also will group together such networks as WarnerMedia’s HBO and Discovery’s HGTV, Food Network and OWN. Discovery shareholders will own the remaining 29% stake. AT&T said it will receive about $43 billion of cash, debt securities and WarnerMedia’s retention of certain debt.
The deal needs to be cleared by federal regulators. The companies don’t expect it to be finalized until the middle of 2022, so it won’t have any immediate impact on subscribers of either service.
It is still unclear what the spinoff means for Atlanta. Ted Turner launched CNN and a raft of networks here decades ago but sold them to Time Warner in 1996. The Turner Broadcasting name remained part of Time Warner until 2019, when AT&T rejiggered its assets, absorbing Turner’s operations under the WarnerMedia umbrella. (As a salve, AT&T did rename the Midtown Techwood campus Ted Turner campus and Turner appeared at a ceremony in late 2019.)
AT&T last year announced a planned sale of its storied CNN Center, where a large portion of CNN operations are based in downtown Atlanta, including CNN International, HLN and the digital operations. But it said at the time CNN would stay in that building for at least a few more years.
WarnerMedia’s largest operations are in Los Angeles and New York but Atlanta is a solid third. Among the 842 job listings on its website Monday, 163 of them are out of Atlanta. Many of the available jobs in Atlanta are in finance, engineering, technology and CNN-related news production.
Atlanta is also home to TNT’s NBA-related shows such as “Inside the NBA” as well as its esports operations.
But WarnerMedia’s top executives are primarily based in New York and Los Angeles. And most of CNN’s top on-air talent work out of New York City. Discovery is also based out of New York.
AT&T purchased Time Warner three years ago despite having minimal experience in the entertainment field. Its major move was to create HBO Max, a new streaming service which includes its HBO shows (”Mare of Easttown,” “Euphoria,” “Succession”) and a range of original programming as well as “Sesame Street,” “Friends,” “The Fresh Prince of Bel-Air” and “The Big Bang Theory.”
Discovery is a dominant force in reality-based programming on networks such as Animal Planet, Food Network, Travel Channel, TLC and HGTV. It took the archives of those networks, along with new shows, to create a streaming service called Discovery+, which debuted in March of 2020. Discovery+ is only unscripted TV, from “Sister Wives” to “Property Brothers,” from “Ghost Brothers” to “Good Eats.”
It’s too early to say how the new spinoff will combine the two services and its impact on consumers.
“We still don’t know what this means,” said Dan Rayburn, a streaming media expert and principal analyst at Frost & Sullivan, a market research company out of Santa Clara, Calif. “Are they still going to have two different apps? One has live TV. One doesn’t. One has sports. One doesn’t.”
For now, Rayburn said, this is more a structural combination that will enable both companies to save some money up front, especially on the technical side.
Once the new WarnerMedia is together as one, it will be larger than Netflix or NBCUniversal, which operates the Peacock streaming service. Currently, on the streaming front, Netflix and Disney have far more subscribers than HBO Max (at about 20 million) and Discover+ (at 15 million worldwide).
Discovery’s president, David Zaslav, 60, will run the new WarnerMedia spinoff. Zaslav has led Discovery for 14 years, joining the company when basic cable was ascendant and before streaming took bloom.
In an online call to investors Monday, Zaslav said the new company spent a combined $20 billion on content in the past year, more than even Netflix.
“You got to have content people love so much they would run home and pay for it before they pay for dinner or a roof over their head,” he said on the call.
Zaslav is close friends with Jeff Zucker, who has run CNN the past eight years but had previously announced plans to step down by the end of the year.
Al Meyers, a former Turner Broadcasting executive out of Atlanta, found it intriguing that AT&T has ceded control of the spinoff to the smaller company Discovery. “While this move is certainly unsettling for employees who just adjusted to the AT&T merger, it creates a formidable competitor to Disney. And Zaslav has a clear track record in content.”
AT&T also gets to unload a lot of debt, Meyers added. “It’s a great transaction for the AT&T shareholders.”
Cable TV, while steadily losing subscribers to cord-cutting streamers, still makes money for WarnerMedia while streaming remains an investment and battle for consumer pocketbooks. Nonetheless, ratings for most cable networks have dropped sharply in recent years.
CNN had strong ratings in 2020 into early 2021, fueled by the election, social unrest and the pandemic, and remains a huge profit center for the company. All news cable networks have seen some slippage in audience since Joe Biden took over as president. In April, CNN came in third in overall ratings among basic cable networks behind MSNBC and Fox News.
With WarnerMedia placing greater emphasis on its HBO Max streaming service, fewer original shows are popping up on TNT and TBS.
Conan O’Brien, wooed to TBS in 2010 by former TBS executive and current Atlanta Hawks chief executive Steve Koonin, is leaving his talk show on the network next month and will instead host an unspecified new show on HBO Max.
The basics of the deal:
- WarnerMedia is being spun off by AT&T as a separate company, merging its content with that of Discovery, which owns HGTV, Food Network, TLC and OWN, as media companies battle for streaming eyeballs and compete against the likes of Disney and Netflix.
- Affected cable networks with Atlanta ties include CNN, TBS, TNT, Cartoon Network and Turner Classic Movies.
- Atlanta is home to about 6,000 WarnerMedia employees.