• by Karlene Lukovitz  @KLmarketdaily, November 3, 2021

The merger of WarnerMedia and Discovery is “well on track for a mid-2022 close,” and is now expected to kick off with less debt than originally projected, Discovery executives reported during the company’s third-quarter earnings report on Wednesday.

The company is now projecting that the new Warner Bros. Discovery entity will have a debt ratio of 4.5 times EBITDA (earnings before interest, taxes, depreciation and amortization), an improvement from the previously projected 5 times EBITDA—in part because of Discovery’s better-than-expected performance this year.

Discovery ended Q3 with 20 million paid streaming subscribers across its streaming services, including Discovery+ — up 3 million from Q2 — in part due to viewership and subscription signups driving by the 2020 Tokyo Olympics.

The company also announced that Kevin Mayer, chairman of the board of the DAZN sports streamer — former chairman of Disney’s direct-to-consumer and international division, and former CEO of TikTok — will act as a consultant on Warner Bros. Discovery’s D2C distribution strategy, working with the new entity's leadership team.*

In addition, Discovery confirmed that its CFO, Gunnar Wiedenfels, will continue in that role at WarnerBros. Discovery.

A rebound in advertising, including an increase of 28% internationally, and gains in domestic and international distribution revenue, drove Discovery’s overall revenue up 23% year-over-year, to $3.15 billion, exceeding analysts’ estimate of $3.14 billion, per Refinitiv data.

However, higher costs resulted in total adjusted operating income before depreciation and amortization (OIBDA) declining 24%, to $726 million.

Discovery CEO David Zaslav enthused that the eventually planned merging of Discovery+ and HBO Max will result in a service that appeals “to all demographics,” adding that its  global addressable market “should be on par with the biggest streaming services.”

He declined to be more specific, citing regulatory review of the WarnerMedia-Discovery merger.

However, JB Perrette, president and CEO of Discovery Streaming and International, said it’s possible that the two services may initially be offered as a bundle, while the technological and marketing work required to offer a single platform that combines the best features of both is underway.

The process of integrating content will likely be easier and faster in countries in which Discovery+ has not yet been launched, Perrette noted.

Integrating the two into a single platform will result in “meaningful” cost savings and consumer benefits, he said.

*Correction: Mayer was originally described as helping to direct D2C strategy, rather than as a consultant.