Some things just go together. Like chips and tomato sauce. 🍟🍅 Salt and pepper. Gin and, well, everything. 🍸 But it turns out, just because you think something should go together, doesn’t mean it actually should. That was AT&T’s (T) first mistake. Thinking that because they had 100+ million customers and the fibre optics to deliver big content to small screens, that buying Time Warner would be their ‘perfect match’.
The US$85 billion deal crossed the line in October 2016. Then came AT&T’s second mistake. They set out to ‘disrupt the company’ they bought, muscling AT&T’s management into Time Warner’s boardrooms. 💪 Because people who know about cables and stuff know how to create content. Yeah right. Well, that’s the story from former Time Warner chair and CEO, Jeff Bewkes, disputed by AT&T.
But shareholders may not have been happy with owning shares in what once was a cash flow business that then bought a cash-sucking content entity. They might have been right. Since the ambitious ‘innovation’ merger, AT&T’s share price has dropped 36% from US$27.97 in August 2016 to sit at US$19.46 today, and dividend rates have fallen from above 9% to just under 6%. 📉 No surprises AT&T announced in May last year they’d be spinning off of their content arm to focus on what they’re known for, 5G and fibre.
Now a new pairing hopes to bring the binge watch vibes to screens. And last Friday’s Discovery merger with WarnerMedia, to create Warner Bros Discovery (WBD), doesn’t only combine assets including HGTV, Food Network, Animal Planet with HBO, CNN, Cartoon Network and Harry Potter’s Warner Bros movie studio. According to Bank of America it brings a powerhouse of advertising opportunities too.
Does this mean popular streaming services like Netflix (NFLX), Apple TV (APPL) and Amazon’s Prime (AMZN) should be worried? Probably not…yet. Competition’s not new for an industry that entered the fray to take down cable and broadcast media since inception. That, and WBD inherited a tonne of AT&T’s debt and will need more than Potter’s wand to make the magic happen. Expecto Patronum! 🎇