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Warner-Discovery deal may challenge incumbent streaming brands

In a deal that could reshape the Indian over-the-top (OTT) video streaming market, international media companies AT&T Inc. and Discovery, Inc. have announced a definitive agreement to combine WarnerMedia’s entertainment, sports and news assets with Discovery’s non-fiction and international entertainment and sports businesses to create a standalone global entertainment company.

A statement from both companies released Monday night said the transaction will create substantial value for AT&T and Discovery shareholders by “accelerating both companies’” plans for leading direct-to-consumer (DTC) streaming services for global consumers.” With limited details available on how the deal would pan out for specific geographies like India, media experts said the combined entity could be a powerful competitor in the Indian web streaming segment, challenging the might of incumbents like Netflix, Amazon Prime Video and Disney+ Hotstar, if it invests enough in local content.

Among streaming services, Disney+Hotstar is the leader in India with 34 million subscribers (including Indonesia), Amazon at 17 million and Netflix at 4.6 million.

While Warner’s streaming service HBO Max is currently unavailable in India, discovery+ launched only last year here and is yet to fully find its feet, said a media analyst declining to be names. “The new entity may be seen as a bit of a premium proposition but it will need local content to survive (when launched here),” said the analyst.

Currently, HBO Max is popular in the US where, of late, it has been premiering films like Wonder Woman 1984 and Godzilla vs Kong simultaneously with their release in theatres. WarnerMedia Entertainment Networks did not respond to Mint’s queries.

Meanwhile, though discovery+ has the advantage of a catalogue from Eurosport, a pan-European television sports network that is a subsidiary of the company, but it is nowhere close to cricket like properties like the Indian Premier League that remain with Disney. Discovery India declined comment on the global deal and its impact on India.

AT&T-owned WarnerMedia and Discovery network said that in the new global entertainment company, Warner will own stock representing 71% of the new entity, and Discovery 29%.

Warner owns TV channels like CNN International and children’s channels Cartoon Network and POGO in India, besides distribution services for Hollywood films.

The deal between Warner and Discovery may seem inspired by Walt Disney’s acquisition of Rupert Murdoch’s 21st Century Fox Inc. in 2017 but Star network in India was entrenched and profitable in the broadcasting and streaming sectors, said the media analyst. Star operates a several entertainment channels in Hindi and regional languages.

In contrast, Discovery may have seen its revenue hit as the new tariff order of the Telecom Regulatory Authority of India in 2018, that mandated unbundling of channels, reduced the reach of niche, infotainment channels. Discovery operates channels like Discovery Channel, TLC and Animal Planet, among others.

Last year, WarnerMedia International had announced the shutdown of the HBO SD (standard definition) and HD (high definition) linear movie channels in India and Pakistan.

Warner, itself, had hinted at the significance of the Indian market earlier.

“If you want to be a strong global player, you have to be strong in Asia-Pacific. In India, we don’t have the scale that we want and where we have to be. In order to get there, the workhorse will be HBO Max,” Gerhard Zeiler, head of international, WarnerMedia had said in a fireside chat at the APOS Summit 2020, an event curated by Media Partners Asia (MPA) in September. MPA is an independent provider of research, advisory and consulting services in media, telecom and technology.

While Warner already has a foothold in countries like China and Japan, in 10 years, the company wants 70% of its revenue coming from international markets as opposed to 30% currently, Zeiler had added.

Karan Taurani, research analyst at Elara Capital Ltd said the English entertainment and infotainment genres that Warner and Discovery TV channels belong to, has already ensured they remain niche. The big space to capitalize on remains digital. “Bundling their content together makes sense and can be a good boost to both companies. Media consolidation is the only way to go, especially in a market like India which is so fragmented because of multiple regional languages,” Taurani added. It also bodes well for the content ecosystem, said the media analyst quoted earlier.

“Just like the entry of GECs (general entertainment channels) like Colors in the late-2000s had brought in experimentation in TV shows, this could also compel OTTs to up their game,” the person said.

Netflix declined to comment on the possibility of fresh competition in India. However, in a letter to shareholders, as part of its Q1 earnings in April, the American platform noted: “More and more new streaming services are launching, reinforcing our vision that linear TV will slowly give way to streaming entertainment….When comparing services, subscriber figures alone tell only part of the story (given bundles, discounts and other promotions) so it’s important to also focus on engagement and revenue as key indicators of success.” Live Mint


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