Merger Complete, Warner Bros. Discovery Enters Tough Streaming Race

Discovery Inc.’s $43 billion deal to buy WarnerMedia finally closed on Friday, and now the tougher work for new Warner Bros. Discovery begins -- to become a more formidable streaming media player to compete with the likes of Netflix, Walt Disney, Paramount Global, and NBCUniversal.

Combined revenue for the company is estimated to be $49.8 billion this year -- with $35.7 billion from WarnerMedia and $13.1 billion from Discovery. This would mean that the new Warner Bros. Discovery will slot in right below Walt Disney’s $67.4 billion and above Paramount Global's $28.6 billion.

But revenues alone won’t be enough -- either for Warner Bros. Discovery or other big legacy media players -- to really compete with Netflix, according to analysts, in terms of subscribers or viewing when it comes to the key growth business of streaming TV and video content from subscription connected TV services.

Many analysts point to one major reason: Expenditures of TV and movie production -- particularly for original content that is targeted especially for streaming platforms. For example, Netflix said it spent a total $17 billion on streaming content in 2021.



One step in this direction is that Discovery Inc. executives confirmed the company’s main streaming business platforms -- discovery+ and HBO Max --would merge. Business analysts say this is the least the company would need to do to compete.

Currently, Netflix has 222 million global subscribers while Disney+ has 130 million, HBO/HBO Max has 74 million and discovery+ has 22 million.

David Zaslav, now chief executive officer of Warner Bros. Discovery, has said the combined company could reach anywhere from 200 million to 400 million worldwide subscribers.

Currently, Michael Nathanson, a media analyst at MoffettNathanson, has said that overall there has been little to no real competition to Netflix so far -- even if Netflix concedes at times that competitors have taken a ding to its business.

With regard to fourth-quarter 2021 subscriber issues, Netflix said in its shareholder letter: "Competition may be affecting our marginal growth some."

But it then added this: "We continue to grow in every country and region in which these new streaming alternatives have launched." And then, somewhat to analysts' surprise, Netflix said it would be raising its standard plan price to $15.49 a month, from $13.99.

The new company says it now has the "world’s most differentiated and complete portfolio of content, brands and franchises across television, film and streaming."

Just before the deal closed, Warner Bros. Discovery announced over a dozen senior executives who will be in charge of the new combined companies key business areas.

The new Warner Bros. Discovery will have its stock trading under the ticker "WBD."

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