Why the AT&T WarnerMedia Discovery merger could raise prices

Right here we go once more. One other two media firms have determined that they’ll’t stay with being much less profitable than Netflix, and they also’re merging collectively in hopes of making a bigger competitor.

This time, the jealous events are AT&T and Discovery, which introduced plans for a $43 billion merger on Monday morning. If regulators approve, the deal would successfully undo AT&T’s earlier mega-merger with Time Warner in 2018, creating a brand new standalone firm that swimming pools WarnerMedia’s leisure property—together with HBO Max and cable channels like CNN—with these of Discovery. AT&T CEO John Stankey stated the objective is to create “certainly one of the main world direct-to-consumer streaming platforms.”

By no means thoughts that Discovery’s present streaming efforts have been going fairly nicely, racking up 15 million subscribers since Discovery+ launched in early January with favorites like Deadliest Catch and Diners, Drive-Ins, and Dives. And by no means thoughts that HBO Max has been having fun with a development spurt as nicely, with a mixed 63.9 million HBO and HBO Max subscribers in the United States, up from 53.8 million a 12 months in the past. If you happen to actually wish to compete with Netflix, these firms appear to say, you’ve obtained to be even larger.

Sadly for us, that in all probability interprets extra bloated TV providers at increased prices. We’ve been down this street earlier than, and it at all times ends the similar approach.

TV mergers and value hikes: A short historical past

For an instance of how massive media firm mergers result in increased prices, we’d like solely look to Viacom’s merger with CBS in 2019.

The said objective of that merger was to construct a streaming juggernaut whereas giving the mixed firm—now known as ViacomCBS—extra leverage to raise the value of its pay TV channels. And that’s precisely what occurred.

Till final 12 months, YouTube TV and Hulu + Reside TV didn’t embody any Viacom channels of their respective stay TV streaming providers, although they did carry CBS. After the merger, ViacomCBS efficiently negotiated to incorporate Viacom and CBS channels in each providers, and value hikes quickly adopted. The price of YouTube TV jumped from $50 per 30 days to $65 per 30 days final July, and Hulu raised prices from $55 per 30 days to $65 per 30 days in December.

The same state of affairs performed out after Discovery acquired Scripps Networks in 2017. As much as that time, YouTube TV, Hulu + Reside TV, and Fubo TV had supplied in style Scripps channels reminiscent of HGTV and Meals Community, however no channels from Discovery. After the merger, all three stay streaming providers added Discovery’s channels as nicely, and their prices rose in tandem.

AT&T’s absorption of Time Warner in 2018 additionally had its personal prices. Regardless of guarantees that the deal would reduce costs for consumers, AT&T has repeatedly raised prices for its stay TV streaming packages, and it rapidly killed off an inexpensive bundle of channels that it had used to market the merger in the first place.

As for this newest proposed merger, YouTube TV and Hulu + Reside TV already embody channels from each WarnerMedia and Discovery, however their prices could proceed to rise as the mixed firm negotiates new carriage offers. In the meantime, the merger could create a dilemma for FuboTV, which has clung to its value of $65 per 30 days partially by omitting WarnerMedia channels, and for Sling TV, which dropped HBO from its lineup three years in the past.

WawrnerMedia, Discovery, and different firms that personal in style cable channels have little curiosity in making TV bundles cheaper and extra versatile. As a substitute, they’re pumping up the value of pay TV service as they attempt to put money into their very own alternate options to Netflix. Anybody who nonetheless pays for a bundle of TV channels—whether or not it’s through streaming, cable, or satellite tv for pc—is being left with a much bigger invoice.

Extra bloat, fewer decisions

With earlier mega-mergers, at the least there was an upside: Though pay TV subscribers needed to endure increased prices, those that ditched their bundles completely would profit from higher a la carte choices.

Paramount+, as an illustration, is a stronger streaming service than CBS All Entry was earlier than it began including Viacom content material. Discovery+ is a compelling service as nicely, providing an unlimited catalog of consolation meals TV at an inexpensive value of $5 per 30 days (or $7 per 30 days with no advertisements). Even HBO Max is a a lot better worth at $15 per 30 days than HBO alone.

However with a merger between WarnerMedia and Discovery, a la carte streaming could turn out to be extra bloated and costly as nicely.

As of now, it’s unclear whether or not HBO Max and Discovery+ would live on as separate providers—Discovery CEO David Zaslav says he hasn’t decided—however one can simply think about them being rolled into one super-service to tackle Netflix. In the meantime, sources have instructed The Hollywood Reporter that Comcast’s NBCUniversal will “turn its sights on ViacomCBS” for a merger of its personal, elevating the risk of Paramount+ and Peacock being rolled right into a single service.

One among the nice issues about streaming TV proper now could be that it presents selection. If you happen to don’t take care of the actuality fare of Discovery+, you don’t should pay for it. If you happen to don’t assume HBO Max presents sufficient content material to justify its $15 per 30 days value, you possibly can swap to a different service for just a few months and are available again when your favourite present returns. If you happen to don’t assume Peacock deserves a portion of your streaming finances, you possibly can nonetheless entry an enormous chunk of its catalog without spending a dime. The media business’s obsession with mega-mergers is basically an try to whittle down these choices, leaving no selection however to pay extra.

To that finish, it’s telling that the press release from AT&T and Discovery doesn’t say something about decreasing prices for customers. We’ve been burned by mega-mergers so many occasions, why hassle pretending that the consequence shall be totally different this time round?

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