Puck News’ William Cohan doubled down today on his speculation earlier this week that Warner Discovery will eventually (in the next 18 months) merge with NBCU. See fair use quote below, as the piece is behind a hard paywall.
Three main reasons: 1) all that debt ($56 Billion total, and Zaslov has promised investors to cut $3B relatively soon, which means more cuts are coming); 2) WD’s stock is tumbling, and Cohan sees a plausible path for its debt to get downgraded to junk and 3) the main competitors in streaming are just so much bigger. It’s #3 I find most interesting, partly because it is what has motivated Netflix from the start of its invention of the Streaming market. Netflix today is worth about $100 Billion, but it was a worth a lot less when it realized streaming, not mailing DVDs, was the future, and that if they did not start spending like crazy on content soon they would be plowed under by the big boys. Back then, HBO and whoever owned NBC at the time were big boys compared to Netflix, but even then what they were really worried about was Disney and Apple eventually stirring themselves and getting into the game. They knew that was inevitable, and wanted to get a big enough head start that they would have a fighting chance. Today, WD is worth about $89 Billion, and NBCU is worth about $75B. Merged (after likely divestitures) Cohan estimates they would be around $150B, putting them ahead of Netflix, but still behind the Monsters. Disney is worth $200 Billion, and Apple is worth more than $2.5 Trillion. Cohan does not even get into Apple, I just looked up their total valuation, and I’m sure the major fraction of that is not earmarked for investment in their content business, which is still a boutique enterprise for them. But still, at anytime that they want to use it, that’s how much muscle Apple has at its disposal. Point is, even after the merger WD (which of course includes HBO) is currently fighting at a welterweight against some middle and super heavy weights; even if all was well with WD financially (and it ain’t) they are going to have to get a lot bigger, pretty damn quick, to compete. “…at some point relatively soon, David Zaslav is going to have “do something” with Warner Bros. Discovery, perhaps even merge with NBCUniversal, to make it a viable long-term enterprise. On Thursday, during WBD’s quarterly earnings call, Zaz lowered his guidance for next year, prompting investors to dump the stock. The question now is whether Wall Street will be patient, or if Zaz’s finger is hovering over Brian Roberts’s name on his speed dial. Look, the brutal fact is that WBD has $56 billion in debt, an astounding number, most of which is rated by the credit rating agencies just a rung or two above junk. That’s not Zaz’s fault per se, but it is literally the biggest part of the price he agreed to pay to take WarnerMedia off of AT&T’s hands in April. At that time, he promised that he would find $3 billion in synergies and that WBD’s EBITDA for 2023 would be $14 billion. Now Zaz has lowered that estimate to $12 billion, a decrease of 14 percent. That revision came as a surprise to equity investors, causing WBD’s stock to fall nearly 17 percent.” -- Sent from Gmail Mobile -- You received this message because you are subscribed to the Google Groups "TVorNotTV" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To view this discussion on the web visit https://groups.google.com/d/msgid/tvornottv/CAKGtkYJ0oAiM_L%3DXGVb3DWuSk68uE2VLCbO1nGiJAd0i79OLaA%40mail.gmail.com.
