Here's a fun one this morning: AT&T shedding its media assets into a new company it's forming with Discovery in order to go back to being a wireless pure-play.
Frankly, there are so many deals that leave you scratching your head that it's nice to see one come along that seems to make a lot of sense. And yes, it's a rapid about-face from AT&T, which fought tooth-and-nail (and cost shareholders more than $100 billion, including debt) to buy Time Warner just a couple of years ago. But you have to credit AT&T for doing it anyway.
David Faber interviewed both AT&T CEO John Stankey and David Zaslav, the Discovery CEO who will become the leader of the new joint venture, this morning. Their vision is grand, and it has to be in order to compete with Netflix, Disney+, Amazon Prime and all the other players in the streaming wars. But Zaslav thinks the combined company, which will own assets ranging from CNN to HBO to HGTV and Eurosport, could eventually have anywhere from 200 million to 400 million subscribers.
There's not even a name for the new company yet (AT&D?), which will be about 70% owned by AT&T, and it's not clear whether all these assets will be offered in one combined streaming service or across a few different existing ones. But shareholders of both companies seemed to like it--although AT&T has halved its gains and is currently up about 2%, and Discovery has turned negative.
And sure, plenty of challenges remain, from both companies' debt loads to AT&T's "resized" dividend to the simple fact of the new company going up against the likes of Netflix, Disney, Amazon, and Apple in the streaming wars. But Mr. Stankey insists this will let AT&T invest cash for a better shareholder return (not to mention existing shareholders will have a sizeable stake in the new company), and Mr. Zaslav told David the new company will be "a free cash flow machine."
The name for the new company will be announced in the next several days, Mr. Zaslav said. But whatever they call it, it's a formidable new player in the market.
More at 1 p.m! See you then...