The CEO of WarnerMedia has lawyered up after being blindsided by the blockbuster merger between AT&T and Discovery. Jason Kilar has hi...
The CEO of WarnerMedia has lawyered up after being blindsided by the blockbuster merger between AT&T and Discovery.
Jason Kilar has hired lawyers to negotiate his exit from WarnerMedia, after he was left out of negotiations for the new company and only found out about it in recent days, the New York Times reported.
AT&T bought WarnerMedia, which includes HBO, CNN, Warner Brothers and Cartoon Network, for $108.7 billion in 2018
The CEO of Discovery, David Zaslav, told reporters at a call on Monday that he and AT&T CEO John Stankey, had met over the last few months 'secretly from my brownstone in Greenwich Village' to organize the deal, which will create a giant streaming service to rival Netflix.
Their conversation had begun three months earlier in February after Zaslav emailed to lament how the COVID-19 pandemic had led to the cancellation of the AT&T Pebble Beach golf tournament in California, where the two friends had planned to meet, Reuters reported.
The email - which included emojis of a golf player and the sunglass emoji - resulted in a two-hour conversation between the men, which quickly turned to the subject of mergers and acquisitions.
A WarnerMedia spokesman told DailyMail.com Kilar remained CEO of WarnerMusic, and said his sole focus was continuing the 'momentum the company has going on and the upcoming global expansion of HBO Max'.
In a message to staff on Monday morning, Kilar called it a 'defining moment' for the company and thanked them for their hard work.
Discovery's share price soared by nearly 10 percent on Monday morning before ending the day 5% down at $33.85.
AT&T's rose by 2 percent after opening bell before closing the day down 2.67% at $31.37
WarnerMusic CEO Jason Kilar, left, has called in lawyers to negotiate his exit after being blindsided by a merger between AT&T and Discovery. AT&T CEO John Stankey, right, met in secret with Discovery boss David Zaslav at Zaslav's Greenwich Villach brownstone to thrash out the deal
This is how the streaming services currently stack up. Netflix has by far the biggest number of subscribers and it spends the most but the new Discovery and AT&T company will spend more
Reuters reported that WarnerMedia, which AT&T bought before he became CEO last year, had become an 'albatross' for Stankey.
He wanted to remove some of AT&T's debt to allow the telecom giant to invest more heavily in 5G phone services.
The company was investing heavily in the race for 5G phone services, including spending $23.4 billion in a wireless spectrum auction in February, Reuters reported.
Stankey felt that no matter how well WarnerMedia performed, its value would not be reflected in AT&T's share price. Investors still valued the company primarily as a wireless carrier.
Zaslav, on the other hand, wanted to double down in media. The rise of TV streaming had left Discovery, owner of lifestyle networks such as Food Network, TLC and OWN, competing against Netflix, Walt Disney and Amazon.com.
Zaslav believed Discovery needed scale and felt its $14.6 billion acquisition of Scripps Networks Interactive in 2018 was not enough. He flirted briefly with the idea of combining Discovery with Viacom and CBS, which was itself in the process of merging in 2019. But nothing materialized.
The Discovery and AT&T CEOs started talking regularly, Reuters said.
Stankey flew from Dallas, where AT&T is headquartered, to meet Zaslav at his Greenwich Village brownstone in New York City for negotiations, later joined by advisers.
AT&T stands to receive $43 billion in the tax-free spin-off of WarnerMedia, which will be merged with Discovery.
Zaslav will lead the combined company, which will be 29% owned by Discovery shareholders.
Discovery CEO David Zaslav, left, said on Monday that the new streaming service will prioritize news, like CNN. CNN President Jeff Zucker was due to leave at the end of the year but Zaslav said on Monday: 'We will be trying to figure out how do we get the best and brightest to stay'.
AT&T's rose by 2% after opening bell before closing the day down 2.67% at $31.37
Discovery's share price soared by nearly 10% on Monday morning before ending the day 5% down
WarnerMedia brands including CVNN, HBOMax, TNT and HLN will be part of the deal and will go onto the new streaming service that is being launched by Discovery next year. The new service has a name but Discovery hasn't announced it yet
Discovery's TV brands that will also be housed under the new company when the deal is complete next year
This is how the major streaming services stack up. Netflix and Amazon Prime are the clear industry leaders but Disney and others, including Discovery, continue to invest in content
The $43billion deal was announced on Monday. Discovery CEO David Zaslav will serve as CEO of the new company, which has a name but which hasn't been announced.
The Financial Times cited sources on Monday saying the proposed name is Warner Discovery.
It's unclear how much the new service will cost monthly, and where it'll be available when it launches next year.
Discovery CEO Zaslav and AT&T CEO John Stankey told CNN on Monday they hadn't decided yet if they'll continue to offer the channels as individuals, that can be bundled for a higher price, or if they'll only be available as a standalone service that means paying one amount for a large combination of channels and shows.
AT&T shareholders will own 71% of the new company; Discovery shareholders would own 29% of the new company. The boards of directors of both AT&T and Discovery have approved the transaction.
The deal announced Monday would create a separate media company housing all of the Warner and Discovery networks. Warner's CNN is part of the deal, along with HBO Max, TLC and TNT.
The deal aims to create a behemoth that has the horsepower to take on Netflix and Disney in the streaming service race, combining a stable of news and entertainment shows.
Zaslav announced on Monday that in the first year, the new company will invest $20billion in content - $3billion more than Netflix did last year.
Netflix has 207million monthly subscribers and Amazon has 200million. Combining HBO Max and Discovery makes a total of 32million, still considerably less, but the goal is to acquire more as they invest in new content. Disney+ has 103million monthly subscribers.
News of the deal sent Discovery's share prices soaring by nearly 10 percent on Monday morning. AT&T's rose by 2 percent after opening bell.
'It is super exciting to combine such historic brands, world class journalism and iconic franchises under one roof and unlock so much value and opportunity,' Zaslav said, adding that the two companies' assets are 'better and more valuable together.'
In the all-stock deal, AT&T will receive $43 billion in a combination of cash, debt securities, and WarnerMedia´s retention of certain debt.
AT&T shareholders will receive stock representing 71% of the new company and Discovery stockholders will own 29% of the new company.
AT&T had pushed into the streaming sector through HBO Max, a direct competitor to Netflix, Apple, Disney and Comcast.
Discovery launched a standalone streaming service called Discovery Plus this year.
The deal to give up its media business marks a major shift by AT&T, which fought hard to push a transaction through in 2018 to buy Time Warner for $85.4 billion with the Justice Department trying to block the deal on anti-competitive reasons.
The deal is expected to close by the middle of next year.
'This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms.
'It will support the fantastic growth and international launch of HBO Max with Discovery's global footprint and create efficiencies which can be re-invested in producing more great content to give consumers what they want,' AT&T CEO John Stankey said in a statement.
Zaslav said on Monday morning that the new service would focus heavily on news and that he expects the average consumer to have multiple streaming services. 'I think people will have three or four.'
CNN President Jeff Zucker is due to leave the network at the end of the year but Zaslav hinted on Monday he'll try to keep him on.
'We will be trying to figure out how do we get the best and brightest to stay'.
NBCUniversal had been in the running to acquire WarnerMedia.
Now, it's unclear how Comcast, which owns NBCUniversal, will beef up its streaming services to compete.
Earlier this year, Disney launched Disney+, which combines all of Disney's movies with Hulu content.
It has spent billions on new shows, including on Meghan Markle's elephants program.
Apple TV+ has also increased its investment, buying shows like Oprah Winfrey's mental health series that she has made with Prince Harry.
Netflix has a deal in place with Harry and Meghan, too, as it does with Barack and Michelle Obama.
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