AT&T announced that it has reached an agreement to merge its entertainment division into the cable network giant Discovery.
This announcement resulted in the stocks of AT&T sinking and continued to sink till the next six months.
The AT&T stock price currently is positioned at its all-time low in the past year.
The merger of AT&T and Discovery will result in the reduction of the dividend value of the WarnerMedia division of AT&T but on the bright side, the shareholders will be entitled to receive stock in the new company i.e. Warner Bros. Discovery. This seems like a win-win situation for the shareholders.
WarnerMedia was bound to get sold out because of the continuous business setbacks it faced as soon as the pandemic struck the world last year.
WarnerMedia suffered heavy losses due to the closure of theatres and cinemas along with the cancellation of sporting events across the United States of America. Tons of millions were lost as advertisers pulled back due to the pandemic.
All these circumstances resulted in a revenue drop from 13% to 7 % in 2020.
WarnerMedia started to regain momentum and began its recovery journey in 2021. It earned a revenue of $25.8 billion in the first 3 quarters of the year.
The streaming platform HBO Max helped immensely in regaining the momentum and initiating the growth in the form of revenue.
The service was launched in May of 2020 and since then it has added to the revenue in the form of HBO Max subscribers on a quarterly basis.
It is expected that HBO Max will be exceeding the milestone of 100 million subscribers in the next two years. The majority of the subscribers belong to America, so there is a margin that it crosses the milestone more quickly because of the international audience and growth opportunities.
Discovery will add its own zeal to the media side of AT&T. The success of Discovery is not unknown. The company did suffer due to the pandemic but quickly regained its revenue and made a roaring comeback.
Discovery complements AT&T’s WarnerMedia perfectly. The portfolio will grow which will benefit the shareholders as well as both the companies.
