Another battle in the Streaming Wars has been fought – and lost – by a tech giant.

At the beginning of this past week, AT&T announced that it would be spinning off its media empire. It will combine those properties with those from Discovery Inc.

Discovery is the largest producer of unscripted shows.  Discovery’s CEO David Zaslev will lead partnership. This new media company would combine HBO, CNN, TNT, TBS, and the Warner Bros. studio – along with its library – with HGTV, Food Network, Animal Planet, Travel Channel and, of course, the various “Discovery” channels themselves. Discovery already has a number of other channels exclusive to the Australia and New Zealand viewing markets.

A major about-face

This partnership comes three years after AT&T won a hard fight against the Justice Department. AT&T had to defend their $85B purchase of Time Warner. AT&T bought Time Warner to take on Amazon and Netflix, of course. It also sought to pluck off digital ad revenue from Google. However, it was also seen as a way to be able to compete against its peer and rival, Comcast. The latter in 2013 had completed its acquisition of NBCUniversal that it had begun in 2009.

Despite winning the prolonged battle, AT&T lost in the battle of the marketplace. It went from a profitable telecommunication company to a media company with $106B of debt, angering investors. By the time it took to complete the transaction due to the court action, left the launch of AT&T’s flagship HBO Max streaming service a latecomer to the game. Its May 2020 start date was a half year behind Disney+ and Apple TV+. Just as AT&T’s financials upset investors, the decision by WarnerMedia CEO Jason Kilar to shift all of the studio’s cinematic releases to HBO Max without first informing the filmmakers, creatives and theater owners had also left a sour taste. Industry insiders appear to agree that Kilar, a former executive at Hulu,  will not be remaining with AT&T or making the transition to the new company after less than a year on the job.

What is it you do here again?

But even before that, it had been clear that AT&T’s tech-focused leadership did not quite know what to do with its new media empire. The successful Swamp Thing was first cut from 13 to 10 episodes and then cancelled just as the first episode debuted. The shutdown of the DC comics-focused DC Universe streamer, moving the video content to HBO Max made more sense. It was followed by the selling of Crunchyroll to Sony – ceding the anime genre to the latter studio. All in all, AT&T will be losing $42B on the spinoff. As a result, AT&T announced that it will not be paying dividends on its stock for the next few years.

Barry Diller, the media mogul who helped lead ABC and then Paramount, launched the Fox Television and later USA Broadcasting, noted AT&T’s sequential failures with media with an epic level of snark. Citing the company’s faceplants with first AOL and then DirecTV and now TimeWarner, he quipped, “Warner Brothers is now in better hands. How could it be in worse hands?”

What about the supes?

The new company – whose name has yet to be revealed – will be valued at $120B, a $60B loss for AT&T. The corporation will not be cutting its ties as its shareholders will own 71% of the new company’s stock. Industry experts expect that it will take a year for the deal to actually close. One should not expect to see major changes during that time. For the near future the upcoming slate of films are unlikely to be affected, but that doesn’t mean that new opportunities are off the table. 

Zack Snyder’s reshoot of Justice League fed speculation and demand for a continuation of the Snyderverse. This would be separate from the big screen DCEU. However, the future of this may depend in large part on whether Jason Kilar remains as head of WarnerMedia. Ann Sarnoff, chairwoman and CEO of Warner Bros., as well as DC films president Walter Hamada and Warner Bros. Film Chairman Toby Emmerich were all opposed to continuing that cinematic universe. For his part, Emmerich is reportedly looking to exit to a role at Netflix. That leaves the potential fate of the Snyderverse hinging on who else continues with the new company. 

Meanwhile, on the broadcast side of things, the Arrowverse series of shows are also unlikely to change in the near future. These shows air on the CW Television Network. The joint venture between Warner Bros. and CBS Entertainment has had great success with its telling of the heroic adventures of The Green Arrow, The Flash, Supergirl and others – with absolutely no connection to the big screen heroics of the DCEU.  

But what about DC Comics?

The one division that seems to have gotten overlooked in all the media coverage of the transaction is DC Comics. Over the past two years comic book publisher has been disrupted by a number of problems. Personnel issues roiled the company internally while the pandemic exerted external pressures.

As with the rest of its media holdings, AT&T’s leadership did not appear to know what to do with its most successful franchises’ source material. Its creative and editorial staff have been reduced to a fraction of its former size. Zaslav, the new company’s CEO, has promised that his “number one priority is to build up relationships with the creative community.” It will remain to be seen if that extends beyond repairing the damage that Kilar did to the relationship between the studio  and creatives and down to the comic book professionals.

The fate of Warner Bros. Interactive Entertainment is even more unclear. While AT&T had tried to find a buyer in June 2020, it backtracked a few months later. The game company has two things going for it at the moment. It is the home of the Mortal Kombat video game franchise. The movie based on that franchise was a huge success in theaters and on HBO Max. Additionally, its LEGO video games and their cinematic offshoots remain hugely popular. There are plans for mobile games from both franchises. Those may be enough to keep it in house going forward.

In general, the plan is for about $3B in savings from “synergies” (cutting duplicate administrative and other staff, for the most part) but to not sell any assets. In that regard, it is a complete 180 from the past three years. Variety reports that Kilar is looking to bail out with a $42M golden parachute.

What the future may hold

The new company will continue to compete against Amazon, Netflix and Disney+ and the other services. Its mix of scripted (Warner Bros, et al) and unscripted (Discovery, etc.) programming echoes Disney’s inclusion of National Geographic nature shows as part of its larger offerings. Zaslav promised to spend $20B on new content each year, compared to $17B spent by Netflix. And he further stated that he planned to increase that budget going forward. The company, which will be named next week, is projected to have a 2023 revenue around $52B, giving it a strong foundation to succeed where its previous owners faltered.

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