Does Disney Own Discovery as It Merges With HBO Max?

Mohit Oberoi, CFA - Author

Aug. 5 2022, Published 8:23 a.m. ET

In 2023, HBO Max and Discovery+ are set to merge into a single service. Does entertainment giant Disney own Discovery? If not, then who owns the company?

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The outlook for media, including streaming companies, has deteriorated over the last year. Companies are finding it tough to attract and retain subscribers. Along with the rising competition, the slowdown in the economy and rising inflation have played a spoilsport with streaming companies.

Disney doesn't own Discovery.

Although Disney doesn't own Discovery, it does own a lot of other companies including ABC, Marvel, Pixar, and Hollywood Records. The company also owns Hulu and ESPN.

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Apart from the Disney+ streaming service, which was launched in the second half of 2019, the company also offers ESPN+ and Hulu subscriptions. In the most recent update, Disney said that it has 137.7 million Disney+ subscribers globally of which 44.4 million are in North America. It has 43.2 million Disney+ subscribers outside North America, while the remaining 50.1 million subscribers are for Disney+ Hotstar.

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Disney is transforming into a streaming giant.

Disney has 22.3 million ESPN+ subscribers and 45.6 million Hulu subscribers. The company has forecast that it will have between 230 million and 260 million for Disney+ by the end of fiscal 2024. Across all platforms, including Hulu and ESPN, it expects to have between 300 million and 350 million subscribers by then.

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The forecast looks encouraging even though it won’t be an easy road amid the slowdown in streaming growth, especially in developed markets. Even Netflix has lost 1.2 million subscribers in the first half of 2022, mostly due to its decision to exit the Russian market.

Who owns Discovery?

Discovery was a standalone company. However, in 2021, AT&T divested Warner Bros. and combined it with Discovery in an all-stock, Reverse Morris Trust transaction. The merger got completed in 2022. Warner Bros. Discovery is now a publicly traded company and trades under the ticker symbol “WBD.” So, Warner Bros. Discovery now owns Discovery.

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Since AT&T is the largest stockholder of WBD, it would be fair to say that AT&T owns Discovery. On Aug. 4, Warner Bros. Discovery released its first earnings as a publicly traded company and the results were way below the estimates.

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Warner Bros. Discovery missed its earnings estimates.

Warner Bros. Discovery reported revenues of $9.84 billion in the second quarter, which were almost $2 billion lower than the $11.83 billion that analysts were expecting. It posted a net loss of $3.46 billion in the quarter, largely on restructuring and integration costs. Such expenses are common in the first quarter following such business combinations.

Warner Bros. Discovery also lowered its 2022 adjusted EBITDA guidance to between $9 billion and $9.5 billion. It expects the metric to rise above $12 billion in 2023. The company had 92.1 million subscribers at the end of the quarter and expects the count to rise to 130 million by the end of 2023.

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Discovery+ and HBO Max will merge by 2023.

As was widely expected, Warner Bros. Discovery announced that Discovery+ and HBO Max would merge by 2023. Its streaming business is making losses, just like Disney. However, Warner Bros. Discovery forecast that the losses would peak in 2022 and expects the U.S. streaming business to post profits from 2024. In 2025, the company expects $1 billion in EBITDA from the global streaming business.

Meanwhile, markets aren't buying into the long-term growth story that Warner Bros. Discovery provided during the earnings call and the stock is trading sharply lower in the premarket on Aug. 5.


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