Abstract

The case discusses the merger between US-based telecom giant AT&T Inc.’s (AT&T) media arm WarnerMedia and global media and entertainment company Discovery, Inc. (Discovery) to form a global standalone media and entertainment company called WarnerMedia Discovery Inc. (WBD). In May 2021, AT&T announced a US$43 billion deal to spin off its media segment, WarnerMedia, and merge it with Discovery. The case describes the rationale behind the merger and the expected synergies. Available in more than 220 countries globally and in 50 languages, WBD would own one of the deepest libraries in the world with nearly 200,000 hours of iconic programming, thereby placing the new company in a better position to compete in a crowded streaming space. The new company would combine complementary and diverse content strengths with broad appeal – WarnerMedia’s premium entertainment, sports and news assets, including HBO, CNN, Cartoon Network, TLC, TNT, TBS, truTV, Travel Channel, TNT, and the Warner Bros. studio, with Discovery’s non-fiction and global entertainment and sports channels including Food Network, HGTV, Animal Planet, TLC, and Investigation Discovery. WBD, which owned streaming services such as HBO Max and Discovery+, was set to become a challenger to streaming giants Netflix and Disney+. At the end of 2021, HBO Max had 73.8 million global subscribers, making it the third-biggest streaming service globally, while Discovery+ had 22 million worldwide customers. The case highlights the possible challenges the merged entity could face going forward, including intense competition in the global streaming space, a pricing dilemma, a heavy debt load, global expansion, and the complexity of operating two distinctive brands with a diverse portfolio of TV networks and streaming services. Some of the key challenges before David Zaslav (Zaslav), President & CEO of WBD, were how to ensure that WBD would achieve the projected synergies, weather potential obstacles, and emerge as a dominant player in the global OTT space.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Analyze the growth and scope of the global OTT market
• Explore the rationale behind the WarnerMedia and Discovery merger and its potential synergies
• Study the need for consolidation in the global OTT industry and evaluate the impact of the Warner-Discovery merger on the industry
• Understand the importance of post-merger integration and the inherent challenges
• Identify the issues and challenges faced by Zaslav following the merger, and explore strategies he may adopt to overcome these challenges.

Keywords

Merger and Acquisitions; Strategic Alliances; Post-merger Integration; Brand Dilution; Global OTT Market; Cultural Compatibility; Synergies; Corporate Strategy; Competitive Advantage; Differentiation; Core Competence