Following any economic shock, there is always opportunity. Even Warner Bros. is not immune. As industries re-shape and recover from any downturn, recession, or in this case, global pandemic others will see a chance to make their moves. As a result, mergers and acquisitions are a feature of any recovery.

After having customer habits completely reshaped and distribution models ripped up for 18 months, the entertainment industry is going to be no different.

The End Of WarnerMedia

First out of the blocks are AT&T and Discovery Inc. They have unveiled plans to merge their assorted media and entertainment assets with AT&T effectively selling off its WarnerMedia division into the merger with Discovery.

This will create a new standalone media company bringing together all things WarnerMedia with all things Discovery to create a giant. The organization’s assets will include Warner Bros. Pictures, HBO, DC Comics, Cinemax, Adult Swim, CNN, Cartoon Network, TBS, TNT, Discovery Channel, HGTV, Food Network, Eurosport, TLC, Animal Planet, Travel Channel, and OWN.

The strategic move is to create:

“…[a] global leader in entertainment [and] a stronger competitor in global streaming.”

Both companies have their own streaming services right now, Warner Bros. in the form of HBO Max and Discovery has Discovery+. While they will remain separate at first, let us not kid ourselves. These will fold in together as they attempt to make up ground on Disney+, Amazon, and Netflix. In a joint press release, they say:

“The transaction will combine WarnerMedia’s storied content library of popular and valuable IP with Discovery’s global footprint, a trove of local-language content and deep regional expertise across more than 200 countries and territories.

The new company will be able to invest in more original content for its streaming services, enhance the programming options across its global linear pay TV and broadcast channels, and offer more innovative video experiences and consumer choices.”

Interestingly, Discovery CEO David Zaslav will lead the merged company as CEO. This could mean that WarnerMedia CEO Jason Kilar is displaced. This also points, staggeringly, to Discovery being the senior partner in this merger.

Or maybe making a complete mess of a goldmine property like the DCEU, annoying your lead creatives and talent, presiding over an internal bullying cover-up, and turning the fans against the product isn’t a winning strategy? Who knew! Maybe this will have repercussions on the incoming destroyer of franchises, JJ Abrams, and his designs on the DCEU?

The companies say the deal will complete next year subject to shareholder and regulatory approvals. There is no straight cash involved in the deal. Instead, it will be handled via a Reverse Morris Trust. This is a complex stock swap that involves securities, shares, and debt retention.

The combined company is estimated to make $52 billion in revenue in 2023 and will end up with one of the largest content libraries available to stream with over 200,000 hours and 100 brands.

Viacom and CBS, Disney and Fox, now this. The market rationalization is underway. If Apple didn’t have such deep pockets from selling phones and tablets, Apple TV would already be at risk.

Warner Games To Split

Stuck in the middle of all these corporate movies is the video game business – Warner Bros. Interactive Entertainment. Coming Soon is reporting they are to be split apart with some remaining with AT&T and others moving to the new company. Reports say many within WarnerMedia were caught completely by surprise by the announcement of this deal, so they are totally unsure how it will pan out.

There are eleven separate studios in the games division including Rocksteady Studios, Avalanche Software, and Monolith Productions. Together they make games ranging from the Batman: Arkham series to Disney: Infinity and Mortal Kombat. They have staff in Boston, Montreal, New York, San Diego and San Francisco.

Amazon In For Major Studio

The news doesn’t stop there. Amazon is several weeks into negotiations on a deal to acquire MGM for around $9 billion.

The Information reported the news, and then several other media sources confirmed this. The news of the AT&T and discovery merger will potentially steel their resolve to drive this through.

MGM is the last major studio left without a streaming service and has struggled in recent years, kept afloat mainly by its extensive back catalog including the Rocky and Pink Panther franchises, and its distribution deal around James Bond.

It does not own the rights to Bond, so this deal would not mean Amazon owns Bond. Those rights remain with EON productions and the Broccolli family.

Amazon spent $11 billion on TV series, movies, and music last year. This deal is thought to value MGM at $9 billion, $1 billion down on the price from last year when the deal was first mooted.

Mike Hopkins, senior VP of Amazon Studios and Prime Video is said to be working with MGM board chairman Kevin Ulrich on this deal. Ulrich is the founder of the hedge fund Anchorage Capital. Anchorage is MGM’s majority shareholder. Variety has since confirmed the existence of the plan.

If successful it means Amazon gets another 4,000 film titles for Prime Video due to the sheer amount of history MGM are carting around with them. This would include 12 Best Picture winners. On the TV side, it is none too shabby wither. MGM’s catalog includes Fargo, Stargate, Vikings, and Survivor. Amazon would also gain control over the Epix pay-TV network.

Two years ago, when Last Movie Outpost was first launched, we talked about how the streaming wars would lead to massive market rationalization. We didn’t expect a global pandemic to be the kick-starter though!