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AT&T’s WarnerMedia merger with Discovery could mean higher prices for you

Media megamergers have been raising prices for years. Why would this one be any different?

AT&T’s WarnerMedia merger with Discovery could mean higher prices for you
[Source Images: iStock]
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Here we go again. Another two media companies have decided that they can’t live with being less successful than Netflix, and so they’re merging together in hopes of creating a larger competitor.

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This time, the jealous parties are AT&T and Discovery, which announced plans for a $43 billion merger on Monday morning. If regulators approve, the deal would effectively undo AT&T’s previous mega-merger with Time Warner in 2018, creating a new standalone company that pools WarnerMedia’s entertainment assets—including HBO Max and cable channels like CNN—with those of Discovery. AT&T CEO John Stankey said the goal is to create “one of the leading global direct-to-consumer streaming platforms.”

Never mind that Discovery’s existing streaming efforts have been going pretty well, racking up 15 million subscribers since Discovery+ launched in early January with favorites like Deadliest Catch and Diners, Drive-Ins, and Dives. And never mind that HBO Max has been enjoying a growth spurt as well, with a combined 63.9 million HBO and HBO Max subscribers in the United States, up from 53.8 million a year ago. If you really want to compete with Netflix, these companies seem to say, you’ve got to be even bigger.

Unfortunately for us, that probably translates more bloated TV services at higher prices. We’ve been down this road before, and it always ends the same way.

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TV mergers and price hikes: A brief history

For an example of how big media company mergers lead to higher prices, we need only look to Viacom’s merger with CBS in 2019.

The stated goal of that merger was to build a streaming juggernaut while giving the combined company—now called ViacomCBS—more leverage to raise the price of its pay TV channels. And that’s exactly what happened.

Until last year, YouTube TV and Hulu + Live TV did not include any Viacom channels in their respective live TV streaming services, though they did carry CBS. After the merger, ViacomCBS successfully negotiated to include Viacom and CBS channels in both services, and price hikes soon followed. The cost of YouTube TV jumped from $50 per month to $65 per month last July, and Hulu raised prices from $55 per month to $65 per month in December.

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A similar scenario played out after Discovery acquired Scripps Networks in 2017. Up to that point, YouTube TV, Hulu + Live TV, and Fubo TV had offered popular Scripps channels such as HGTV and Food Network, but no channels from Discovery. After the merger, all three live streaming services added Discovery’s channels as well, and their prices rose in tandem.

AT&T’s absorption of Time Warner in 2018 also had its own costs. Despite promises that the deal would reduce costs for consumers, AT&T has repeatedly raised prices for its live TV streaming packages, and it quickly killed off a cheap bundle of channels that it had used to market the merger in the first place.

As for this latest proposed merger, YouTube TV and Hulu + Live TV already include channels from both WarnerMedia and Discovery, but their prices could continue to rise as the combined company negotiates new carriage deals. Meanwhile, the merger could create a dilemma for FuboTV, which has clung to its price of $65 per month in part by omitting WarnerMedia channels, and for Sling TV, which dropped HBO from its lineup three years ago.

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WawrnerMedia, Discovery, and other companies that own popular cable channels have little interest in making TV bundles cheaper and more flexible. Instead, they’re pumping up the price of pay TV service as they try to invest in their own alternatives to Netflix. Anyone who still pays for a bundle of TV channels—whether it’s via streaming, cable, or satellite—is being left with a bigger bill.

More bloat, fewer choices

With previous mega-mergers, at least there was an upside: Although pay TV subscribers had to endure higher prices, those who ditched their bundles entirely would benefit from better a la carte options.

Paramount+, for instance, is a stronger streaming service than CBS All Access was before it started adding Viacom content. Discovery+ is a compelling service as well, offering a vast catalog of comfort food TV at a reasonable price of $5 per month (or $7 per month with no ads). Even HBO Max is a much better value at $15 per month than HBO alone.

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But with a merger between WarnerMedia and Discovery, a la carte streaming could become more bloated and expensive as well.

As of now, it’s unclear whether HBO Max and Discovery+ would continue to exist as separate services—Discovery CEO David Zaslav says he hasn’t decided—but one can easily imagine them being rolled into one super-service to take on Netflix. Meanwhile, sources have told The Hollywood Reporter that Comcast’s NBCUniversal will “turn its sights on ViacomCBS” for a merger of its own, raising the possibility of Paramount+ and Peacock being rolled into a single service.

One of the great things about streaming TV right now is that it offers choice. If you don’t care for the reality fare of Discovery+, you don’t have to pay for it. If you don’t think HBO Max offers enough content to justify its $15 per month price, you can switch to another service for a few months and come back when your favorite show returns. If you don’t think Peacock deserves a portion of your streaming budget, you can still access a big chunk of its catalog for free. The media industry’s obsession with mega-mergers is really an attempt to whittle down those options, leaving no choice but to pay more.

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To that end, it’s telling that the press release from AT&T and Discovery doesn’t say anything about lowering costs for consumers. We’ve been burned by mega-mergers so many times, why bother pretending that the outcome will be different this time around?

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