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AT&T To Spin Off, Merge With Discovery To Compete With Streaming Giants

ARI SHAPIRO, HOST:

Just three years after AT&T finalized an $85 billion deal to acquire Time Warner, AT&T is spinning it off. The company currently known as WarnerMedia will merge with Discovery to create a new media company, which means the Food Network and HGTV will all be under one roof with HBO and CNN and "Harry Potter."

(SOUNDBITE OF FILM, "HARRY POTTER AND THE SORCERER'S STONE")

ROBBIE COLTRANE: (As Hagrid) Did you ever make anything happen, anything you couldn't explain? You're a wizard, Harry.

DANIEL RADCLIFFE: (As Harry Potter) I'm a what?

SHAPIRO: My takeaways are to explain all this, so we're joined by NPR TV critic Eric Deggans.

Hi, Eric.

ERIC DEGGANS, BYLINE: What's the "Harry Potter" spell to create, like, a giant new streaming company (laughter)?

SHAPIRO: I confess I was not a reader. But what does this mean for viewers? Are prices going to go up?

DEGGANS: Well, you know, that's one of the biggest unanswered questions we got right now. I mean, this new company is going to need subscribers. So I kind of doubt they're going to hike up the price, at least right away. But we don't even know what the name of this new company's going to be, although we're hearing that's going to come in a few days.

So this kind of seems to be an attempt to better compete with Netflix and Disney+ by bringing together these two huge libraries of TV shows, films, other media content. Now, the two companies say that this new venture is going to have about 200,000 hours of content with over 100 brands. But, you know, WarnerMedia just launched that streaming service, HBO Max, about a year ago. And Discovery just launched its streaming service, Discovery+, in January. So, you know, are they going to suddenly create yet another streaming service to merge these two or work out some deal where subscribers of one can get access to the other? There's so many questions here about how this is going to affect cost and content. It is no wonder that they're not planning to finalize this deal until the middle of next year.

SHAPIRO: You're talking about streaming services more than live TV. Is this really all about the streaming wars?

DEGGANS: Well, I think this is evidence that the industry is realizing that consumers are really only going to pay for a few big streaming services. And so to compete, the companies that are in the middle - they got to get bigger. So AT&T is also a telecom company that never seemed to really understand the entertainment business. Like, WarnerMedia, for example, upset a lot of people in Hollywood last year when they decided, without that much warning, to release these big movies like "Wonder Woman 1984" in theaters and on streaming on HBO Max at the same time during the pandemic. So now AT&T is going to step back from entertainment with this deal where they'll get $43 billion back, or only about half of what they paid for WarnerMedia in the first place.

SHAPIRO: You mentioned that these companies are getting bigger and bigger. Are there monopoly concerns, regulatory concerns?

DEGGANS: Well, you know, I doubt it, but regulators are going to have to approve this new deal. I mean, Discovery, Inc. is this company that's largely focused on unscripted series like documentaries and so-called reality TV shows on places like the Discovery Channel, TLC, the Food Network. WarnerMedia has a larger footprint with a movie studio, HBO, CNN. But I think it's tough to argue that this new company is going to be - going to limit competition more than Disney, which has a broadcast network and local TV stations. The new combined company is going to be run by Discovery CEO David Zaslav. They're going to spend $20 billion on content. So I think we're going to expect to see lots of new content from this company, which is gunning for subscribers and working hard to establish itself next to Netflix and Disney.

SHAPIRO: That's our resident wizard and TV critic Eric Deggans.

Thanks a lot.

DEGGANS: Thank you. Transcript provided by NPR, Copyright NPR.