Discovery Is Raising A Whopping $30 Billion To Fund WarnerMedia Merger
Last year, the surprising news came our way that Discovery was going to purchase WarnerMedia from AT&T for a gigantic sum of $43 billion. This was, rather amazingly, just a few years after AT&T fought tooth and nail to get approval to buy Warner in the first place, resulting in a gigantic new media company; part telecom, part media business. Now, AT&T is getting out of the media business, spinning off that portion of the company, with Discovery, the media company behind "90 Day Fiance" and "Battlebots," looking to become a giant player. And to do that, they are raising a ridiculous $30 billion to get it done.
As reported by Deadline, Discovery is currently raising the $30 billion through a sale of debt using what are called senior unsecured notes. These are ways for businesses to raise money for purchases such as this. They are not backed by collateral and, as a result, carry a higher interest rate for the purchaser. They are riskier, but the interest rate helps to make them attractive. But the key here is that gigantic number, the lion's share of the total purchase price to make this mega-merger happen. The outlet notes that this is one of the biggest offerings of this kind in corporate history, which really illustrates just how crazy this whole media merger craze has become. But this is what it costs to purchase franchises like "The Matrix" and "Batman." It doesn't come cheap.
The idea here is to merge two very different, very appealing media libraries to create a media giant that can truly compete in the streaming space. Discovery+ and HBO Max corner two gigantic portions of the market. Combined? That makes something that may well be able to compete with the likes of Disney and Netflix. Therein lies the point of all this.
Nearing the endgame
The pandemic forced the issue to happen faster than anyone expected, but once Netflix amassed well over 100 million subscribers around the world (now over 200 million), the writing was on the wall. Streaming is going to be the future, and to compete, it's going to take a ridiculous amount of money and resources. Hence, all of these insane mergers. To that end, Paramount all but put a for sale sign on the front lawn recently, possibly as a target for Apple or Amazon.
For Discovery WarnerMedia (the admittedly uninspiring name of the proposed new company), it's all about the long game and becoming one of the handful of media giants that make it to the end of all of this. Can Peacock really continue to lose $1.7 billion per year for NBCUniversal? What happens when they decide enough is enough? HBO Max and Discovery+, individually, may not be able to hang. But the combined forces of the people behind "Shark Week" and "Alaskan Bush People" coupled with the might of the studio behind "Harry Potter" and DC? The possibilities are spilled on the page. Get ready for Batman reality shows and sorting sharks into Hogwarts houses.
The next giant step is just around the corner as Discovery investors will be asked to approve the $43 billion merger during a March 11 virtual meeting. If it's approved, it's up to the government's regulating bodies to give the go-ahead.