🍿 2022-03-30 14:00:00 – Paris/France.
Two major entertainment companies will soon join forces to better compete with Netflix (NFLX), Walt Disney (DIS) and Amazon (AMZN) in the high-stakes video market in Streaming direct to the consumer. AT&Tthe WarnerMedia division of (T) and Discovery (DISCA) merge to form Warner Bros. Discovery, which will be traded as a WBD stock.
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Warner Bros. Discovery is expected to begin trading early in the second quarter, likely in April. AT&T shareholders will own 71% of the new company and Discovery shareholders will own 29%.
The new company will include the services of Streaming HBO Max, Discovery+ and CNN+ video. But it will also have a host of pay-TV channels and production studios. Included are brands such as HBO, Warner Bros., Discovery, DC Comics, CNN, Cartoon Network, HGTV, Food Network, TNT, TBS, Eurosport, Magnolia, TLC and Animal Planet.
With all of these assets under one roof, investors are wondering if Warner Bros. Discovery will be a giant of Streaming video. And if so, will WBD stocks benefit?
Continuous video center possible
“It creates potential power,” Phillip Swann, editor and publisher of TVAnswerMan.com, told Investor's Business Daily. “And that could very well lead to another membership in the industry. »
Swann predicts further consolidation in the video industry in Streaming. He thinks that Netflix could potentially hook up with Disney.
"Competition is fierce right now, not just in the United States but around the world," Swann said.
HBO Max had 73,8 million subscribers worldwide at the end of 2021, making it the third-largest service in Streaming in importance. Netflix leads with 221,8 million subscribers, followed by Disney+ with 129,8 million.
Discovery+ had 22 million customers worldwide at the end of last year. And the news-focused CNN+ just launched on March 29.
Meanwhile, Amazon Prime has over 200 million subscribers worldwide. But many of those customers signed up for benefits other than the Prime Video service, such as the e-commerce company's free shipping.
Among other competitors in the video market in Streaming include Hulu, controlled by Disney, Comcast (CMCSA) owned by Peacock, World Paramount (PARA) Paramount+ service and AppleAppleTV+ (AAPL).
A tough sledge ahead for Warner Bros. Discovery
Analysts say Warner Bros. Discovery will face major challenges from the start.
To begin with, the business will start with heavy debt. The new company will have approximately $58 billion in gross debt at the time of the merger. It needs to repay that debt while funding content to keep up with its rivals from Streaming video, Morgan Stanley analyst Benjamin Swinburne said in a recent note to clients.
Warner Bros. Discovery is also trying to transition from its linear television channel business to a video business by Streaming direct to the consumer. But with pay-TV services like cable and satellite losing subscribers, WBD faces reduced cash flow from those legacy operations.
In mid-March, Discovery chief financial officer Gunnar Wiedenfels said the new company planned to combine its Discovery+ and HBO Max services into a single service. Wiedenfels is set to become the chief financial officer of Warner Bros. Discovery.
"We believe in a combined product rather than a bundle," Wiedenfels said at Deutsche Bank's Media, Internet & Telecom conference. “The breadth and depth of this content offering is going to be a phenomenal value proposition for the consumer. »
The combination of the two services should happen within months of the merger, Wiedenfels said.
Surprising move called Bold Move
He added that the unified service will be a more broadly appealing consumer product, with HBO Max's more "masculine" scripted series complementing Discovery's reality shows, with their all-female audience.
Alan Wolk, principal analyst at TVRev, said the disclosure of a combined service was unexpected.
“It was a move that took most of the industry by surprise, as the assumption was that Discovery would create a Disney-like bundle from the two services and CNN+,” he said in a statement. newsletter.
Swann called the combination of Discovery+ and HBO Max "a pure power play by the managements of both companies."
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer tech, software and semiconductor stocks.
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SOURCE: Reviews News
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