The streaming content that will result from the merger of WarnerMedia and Discovery Inc. will be valuable enough to merit sizable ongoing subscriptions, Discovery’s CFO, Gunnar Wiedenfels, said this week at a Bank of America conference.
The entity resulting from the merger of the two entertainment industry giants will focus on premium direct-to-consumer subscription services, a top area of focus for Discovery for several years, Wiedenfels said.
In May, AT&T announced plans to combine its content unit, WarnerMedia, with Discovery. AT&T said the deal would bring it an aggregate amount of $43 billion, in a combination of cash, debt and WarnerMedia’s debt retention, CNBC reported at the time.
The merger, expected to close in the middle of next year, will create a combined company called Warner Bros. Discovery.
“We believe it will be the best and most exciting place in the world to tell big, important and impactful stories across any genre and across any platform: film, television and streaming,” Discovery CEO David Zaslav said in a June statement.
Wiedenfels and his team are maintaining a focus on the lucrative streaming business. “I have no doubt we’re creating one of the absolutely leading content powerhouses in the world,” he said.
The combined company will implement a streaming strategy whose outlines are “pretty much ready” as much as possible before the deal closes. “We have been hard at work here over the summer,” he said without sharing details. Deal particulars would be finalized and unveiled in the future, he said.
Wiedenfels declined to tell investors which networks and services the merged company would offer, but both companies would prioritize subscription streaming services as a main offering, he said.
Both Discovery and AT&T offer “average revenue per user-focused, high-value” products with high engagement, he said.
“Fundamentally, we believe … the content of the combined company will be valuable enough to merit a subscription payment on an ongoing basis,” he said. “That [will] continue to be the priority.”
Discovery launched its inaugural U.S. streaming service, Discovery+, in January. Subscribers can access it monthly for $4.99 with ads, or $6.99 without. Last month, Discovery reported 18 million people subscribe to its direct-to-consumer services, including Discovery+, a 1 million increase from June.
“Now with our direct-to-consumer go-to-market strategy for the combined company essentially done, [we are] going to be able to, frankly, spend a little less on marketing right now,” Wiedenfels said.
The ability to reassess Discovery’s positioning and programming in preparation for the merger “has created a better product,” Wiedenfels said. “And that's great for the consumer, for our affiliate partners, and for our advertising partners getting their brands and into the right environment. And we certainly hope that between the WarnerMedia portfolio and ours, there [will be more] upsides.”
In the months prior to the deal closing, Wiedenfels and his team are working to ensure Discovery’s balance sheet is as strong as it can be, he said.
Wiedenfels, who joined Discovery as CFO in 2017, was involved in the company's 2018 acquisition of Scripps Networks Interactive. He helps lead the company’s pivot to a direct-to-consumer model.
On Tuesday, Pascal Desroches, CFO of A&T, said he “couldn’t be more pleased” with the proposed merger’s regulatory review process.
“There is no reason why this merger should not be approved,” he said, according to The Hollywood Reporter. “We are not concerned at all that this could be challenged from a regulatory standpoint."
"We are exactly where we thought we would be at this stage of the process," Desroches added, Deadline reported. “Here is the reality. When you look at the rules around antitrust, there is no reason why this merger should not be approved — especially given the changes in competitive landscape and the participation by big tech companies in media.”
"We have our go-to-market strategy essentially ready," Wiedenfels said. "We’ve got our ducks aligned here [but] obviously, we’re not in a position to speak about that right now.”