AT&T Falls as Investors Digest Deal, Smaller Dividend Payout



CNN Dodges Risk of MSNBC Tie-Up as AT&T Opts for Discovery

(Bloomberg) — For months, Wall Street has called on AT&T Inc. to shed its media assets, including CNN, arguing that investors prefer companies with a singular focus.On Monday, AT&T finally relented, announcing that CNN and its corporate siblings will be joining forces with Discovery Inc., home of networks like HGTV, Food Network and TLC.For CNN, the deal could provide a number of strategic advantages — and avoids the headaches of a potential combination with Comcast Corp.’s MSNBC. David Zaslav, the current head of Discovery who will lead the new combined company, said Discovery’s global business will help “supercharge” CNN’s business outside the U.S.While AT&T has focused largely on wireless service in the U.S. market, Discovery has expanded aggressively overseas. It has a presence in key European markets, which could benefit CNN’s international bureaus. Discovery owns TVN, a broadcast channel in Poland, and has a stake in GB News, a new news channel in Britain run by Andrew Neil, a former executive in Rupert Murdoch’s media empire.“Not only does David offer a hands-on media expertise that AT&T couldn’t offer, but he’s got a global outlook that perfectly matches CNN,” said Jon Klein, the former president of CNN’s U.S. operations.AT&T shares were down 5.8% to $29.55 at 3:09 p.m. Tuesday in New York, with Discovery shares off 0.3% to $33.76.Awkward SituationsThe deal will also free CNN of a corporate parent whose political contributions at times thrust the newsroom into awkward situations. In 2018, for instance, CNN had to cover how AT&T paid President Donald Trump’s personal lawyer Michael Cohen while seeking government approval to buy CNN’s parent company, Time Warner.The deal may also put to rest speculation that CNN is for sale. Before Monday’s announcement, CNN had received interest from potential buyers, according to the Wall Street Journal. But Zaslav shot down the idea Monday, telling CNN “we’re not interested in selling it, and we’re going to invest in it.”In an interview with Bloomberg News, Zaslav cited his experience at NBCUniversal, where he launched the cable news channels CNBC and MSNBC.“I’ve seen the value of those assets,” Zaslav said. “It’s extremely powerful. And in a world where there is so much content, live news and live sports becomes a real palpable currency.”For CNN’s 3,000 employees, the surprising development may provide a measure of relief. Prior to the announcement, some observers believed that Comcast’s NBCUniversal was the most likely merger partner for AT&T’s media assets. Such a pairing would have put CNN under the same roof as its cable-news rivals at Comcast’s MSNBC, the type of forced union that often results in ugly power struggles and painful layoffs.Facing ChallengesRegardless of its owner, CNN still faces challenges. The news network needs to find a way to keep ratings from further eroding during the Biden years. CNN’s audience in the key demographic of 25-to-54-year-olds declined 52% in April from a year earlier, a steeper loss than at MSNBC or Fox Corp.’s Fox News. It doesn’t yet have a streaming destination for cable cord-cutters. And in February, CNN’s leader, Jeff Zucker, who is well-liked internally, said he planned to step down when his contract expires at the end of the year, having successfully led the network through the four tumultuous years of Trump’s presidency.Zaslav, 61, is friends with Zucker, 56. The two play golf together.Zaslav will be sticking around awhile. On Tuesday, Discovery extended his employment contract through 2027. Asked on Monday whether he’d try to persuade Zucker, who has been president of CNN since 2013, to extend his time at the network, Zaslav was vague.“Jeff is super-talented,” he said. “He has to figure out what he wants to do.” Zaslav told CNN he’s “hoping there will be an opportunity for Jeff to stay with us.”Zucker didn’t respond to a request for comment.Zaslav said CNN and Discovery could work together on documentaries and share some of that type of content. CNN has long made docuseries like the travel and food show “Anthony Bourdain: Parts Unknown.” Recently, CNN has generated plenty of buzz with “Stanley Tucci: Searching for Italy,” a travel series in which the actor roams around the country, exploring regional cuisines.Such evergreen, nonfiction programming, at which Discovery excels, can help retain viewers during the inevitable lulls in the news cycle.“There’s a real opportunity with their documentary library,” Zaslav said. “That’s our sweet spot.”(Updates with Zaslav contract renewal in 14th paragraph.)More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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