Three years after it said it would spend more than $100 billion (including assumed debt) for Time Warner Inc., AT&T is a pure-play phone company again, agreeing to spin off its WarnerMedia business into a separate entity with Discovery Inc., effectively ending its years-long experiment in the TV distribution and content business. 

This is the second spin-off the phone giant has made in about three months. In February, it said it would spin off DirecTV in a separate, publicly traded unit that would include private equity giant TPG, for about $16 billion, or less than half the $49 billion ($66 billion including debt) it paid for the asset in 2015.  

With the Discovery-WarnerMedia deal, AT&T has effectively given up on its media strategy, which a mere three years ago was supposed to be the foundation of the new AT&T. Now, AT&T gets $43 billion for an asset it paid $85 billion ($108.7 billion including assumed debt) for in 2018, and becomes a pure-play phone company again. 

In a research note, Bernstein media analyst Peter Supino said that AT&T management came to the realization that Time Warner executives did when they decided to look for a buyer three years ago: the new content model is tough.

“We think this merger discussion evidences AT&T's concern about the cost to make HBO Max a long-term winner in global streaming,” Supino wrote. “We believe that the capable [Time Warner Inc.] management team was elected to sell the company because it could not solve [Time Warner’s] market share problem as a public company prioritizing profits. In that context, we have thought it almost inconceivable that the phone company would solve that same problem. That the phone company is anxious about its adjusted leverage approaching 3.8x makes it even less likely to lead Warner Media to glory.”

Supino’s Bernstein colleague, media analyst Todd Juenger, wrote in a note to clients that the WarnerMedia-Discovery deal is proof that neither company believed it had the scale to make streaming a success alone. But he had doubts that this transaction will make the combined company big enough. 

“Taking two businesses where the vast majority of the cash flow is derived from linear TV, which is in our opinion a structurally impaired business (with cyclicality as well), does not create a better business,” Juenger wrote. 

Also Read: AT&T: Taking a Mulligan on Media 

In a conference call with analysts about the deal on May 17, AT&T CEO John Stankey talked a lot about 5G and fiber, two things that probably haven’t been top of mind for many investors as the company struggled with DirecTV subscriber losses and concerns over HBO Max’s sluggish customer growth. Now, with the distraction of the media business gone, maybe they can focus on what they appear to be good at -- the phone business. 

AT&T is coming a bit late to that decision. Its chief wireless rival, Verizon Communications, came to that realization a few years ago, after dipping its toes in the content creation and distribution businesses. Earlier this month it cleared the media deck with the sale of its remaining media assets to Apollo Global for about $5 billion. Verizon still has its Fios TV pay TV distribution business, but it's clear the real emphasis there is on broadband.

Now AT&T gets to focus on broadband too. During a conference call with media, Stankey  said the goals for the new AT&T would be “simple and straight-forward”: growing its wireless network to reach 200 million POPs by the end of 2023, and to more than double its fiber footprint to 30 million homes by the end of 2025. That sounds like a phone company talking to me. 

For WarnerMedia, which has been on a bit of a roller coaster ride in the past few years, it gets an owner that actually knows the TV business. In a conference call with analysts, Discovery CEO David Zaslav, who will head the new entity, noted that he’s known a lot of the media unit's employees for 30 years. Zaslav had a long career running NBC Cable before joining Discovery about 15 years ago, and he has managed to grow that company through acquisitions and organically. Now he’s leading it into the next stage.

That’s really important. Whatever your thoughts about WarnerMedia under the watchful eye of AT&T management, it’s pretty obvious that the old structure wasn’t working. Since taking over Time Warner in 2018, WarnerMedia has had three CEOs -- Stankey, who became CEO of AT&T last year; Bob Greenblatt, who was fired after about a year on the job; and Jason Kilar, the Hulu founder who suddenly made himself extremely available in the past few weeks, keynoting the MoffettNathanson Media & Communications Summit conference on May 13  and becoming the subject of a sprawling Wall Street Journal profile on May 14.

According to at least one outlet, in hindsight it appears Kilar was beginning to see the handwriting on the wall, and was trying to put himself and his accomplishments out there just in case he had to make a sudden move. The New York Times reported Monday that Kilar was assembling a legal team to negotiate his exit.  

Kilar was thrust into the role after Greenblatt, who had past successes with Showtime and NBC, was shown the door. About seven months after taking the job, Kilar caused some uproar in the talent ranks when he unveiled a plan to shatter theatrical windows, opening up Warner Bros. Studios’ entire 2021 slate to streaming and theaters simultaneously.  WarnerMedia is going back to the old windows for its 2022 movie lineup. 

On the conference call with media, Zaslav called Kilar “a fantastic talent,” but passed to Stankey on the call when asked about the Hulu founder’s future in the new company.     

Stankey said that Kilar remains the CEO of WarnerMedia, but that Zaslav “has got a lot of decisions to make on personnel and how things are structured moving forward during this transition period, as he works his way through it, I’m sure he’ll be talking with folks about where that’s going.” 

Not exactly a ringing endorsement.

Zaslav said that the new company will have a new name, coming in the next week or so, and that the idea is to fully integrate Discovery and WarnerMedia. Whether that means that the two companies’ respective streaming services will be combined as one, isn’t quite clear. Pricing also is going to be key. Currently, HBO Max is the most expensive DTC streaming service at about $15 per month and Discovery Plus is at about $4.99 ($6.99 for an ad-free version) per month. HBO Max is planning to launch an ad-supported version in June, which some reports say will be priced at about $9.99 monthly. How Zaslav melds and prices those two offerings is still a question, but most analysts believe that a $25 HBO Max/discovery plus service is hopefully not in the cards.

Juenger wrote that if the plan is to not offer the Discovery Plus and HBO Max products separately, then the price of one or both has to come down significantly, with no change in content. That, he said, would most likely lower the value of the companies’ current streaming plans. 

“For this new suite of streaming offerings to be more valuable than the current plans, one would have to believe that by sacrificing ARPU of one or both, there would be enough incremental additional subscribers to more than make up for that,” Juenger wrote. 

That could be hard because while some analysts (including Juenger) have noted how this deal will have a big impact on the linear channels, the real reason behind this is the failure for HBO Max to live up to expectations. While HBO Max has about 44.7 million subscribers, more than half of those are estimated to be linear HBO customers. Discovery, which launched its Discovery Plus streaming service in December, has about 15 million customers. While many of those are getting service for free through a promotion with wireless company Verizon, that is still strong growth with a lineup of reality shows that admittedly don’t have the same cachet as Game of Thrones or Mare of Easttown. Zaslav has said that Discovery makes more money per subscriber from streaming than from linear TV,  and that the average viewer watches Discovery Plus about three hours per day. Kilar said at the MoffettNathanson conference that HBO Max engagement is about two hours per day per active account. 

It’s not like AT&T didn’t have high hopes for content when it bought Time Warner in 2018, saying that it would combine the programmer's iconic HBO premium network and linear channels like TNT, CNN, TBS, Cartoon Network, TCM and others with its state-of-the-art telecom services. Chairman and CEO at the time Randall Stephenson was quick to talk about the 100 million-plus subscribers that AT&T had through its wireless services that would be able to access WarnerMedia content. Three years later, Stephenson retired and  Stankey, who had run WarnerMedia shortly after its purchase by the telephone giant, isn’t talking as much about engagement anymore. 

Also Read: AT&T and TPG: There Is No Why

One lesson phone companies seemingly have to learn year after year after year  is that the TV business is not the phone business. And a climate where Disney Plus, The Walt Disney Co. 's streaming content juggernaut, has more than 100 million subscribers but still took it on the chin for not growing fast enough, just shows that streaming, as it is currently modeled, requires an unprecedented level of scale and engagement. No one has been able to figure it out yet. Now, it’s going to be David Zaslav’s problem to solve.  

This story was updated to correct the pricing of the Discovery Plus streaming service.

Discovery Inc. is partnering with food producer Kellogg Company and advocacy group No Kid Hungry to develop public service announcements as part of an initiative to fight childhood hunger in the country.

The PSA’s are currently airing on Food Network as well as TLC as part of Discovery and No Kid Hungry’s "Turn Up! Fight Hunger" initiative, which has provided more than 312 million meals to kids in need since Fall 2019, according to Discovery officials. 

With one in four kids facing hunger this year in the wake of the coronavirus pandemic -- and with the pandemic forcing the closure of schools that provide meals for more than 22 million students --- Discovery hopes to bring attention and additional resources to the crisis through the initiative, according to Discovery Inc. chief corporate operating officer David Leavy.

“Food insecurity among kids during the COVID-19 pandemic is a very worrisome trend and a key area of our focus going forward," said Leavy. "Our partnerships with both No Kid Hungry and Kellogg’s allow us to continue to bring attention to this crisis, mobilize additional resources, and bring immediate relief to families in need.”

Added Jill Davis, chief revenue officer at Share Our Strength, the organization behind the No Kid Hungry campaign: “In the wake of the COVID-19 pandemic, millions more children are at risk of going without the meals they rely on. It will take a greater combination of resources to meet this pressing need, which is why we are inspired to have our longstanding partners Discovery and Kellogg’s bring their collective resources to help us make sure kids are fed during this crisis and in its aftermath.”

Kellogg’s will offer specifically marked boxes of cereal with information and actions that detail how consumers can join the fight to end childhood hunger, according to the company.

 “Food insecurity continues to be a major public health issue in the United States,” said Doug VandeVelde, general manager, Kellogg Ready to Eat Cereal. “Our support for No Kid Hungry helps many schools across the country offer breakfast to set children up to start a successful day with a nutritious meal.”

Hulu said it launched new channel add-ons to its Live TV subscribers, one featuring Spanish-language networks, the other film and lifestyle nets.

One, for $4.99 a month, provides Spanish language news and sports programming from ESPN Deportes, NBC Universo, CNN En Espanol and History Channel En Espanol.

The other, for $7,99 a month includes Lifetime Movie Network, FYI, DIY Network, Cooking Channel and CNBC World.

As part of a recently completed deal with Discovery, later this year, Discovery en Español, Discovery Familia, Discovery Family, Science and Destination America will be added to the Espanol and Entertainment add-on packages.

“With these Español and Entertainment add-ons — and our addition of the Starz premium add-on last week— we’re giving Hulu with Live TV subscribers access to even more of the content they care about so that they can build their own personal, complete TV experience all in one place, and at an affordable price,” Hulu said in a blog post.

Premium cable network DogTV has reached a carriage deal with Dish, the network announced Thursday.

The service, which offers video content targeted to stay-at-home dogs and their owners, will be offered to Dish's satellite customers for $4.99 a month on channel 285, according to network officials.

The deal increases DogTV’s reach in the US by 30% and will help the service get in front of 70 million subscribers by the end of 2018, said the network. Part owned by Discovery Inc., DogTV is also available through DirecTV, Comcast's X-1 platform, RCN, Apple TV, Chromecast, Amazon FireTV, Roku, and as an iOS and Android app.

“We are thrilled to work with Dish to make this unique, creative and fun channel available to more dog lovers,” said Gilad Neumann, CEO and co-founder of DogTV, in a statement. 

Four months after Discovery Communications' purchase of Scripps Network Interactive, executives from Discovery Inc. speaking Thursday at the Television Critics Association summer press tour declared the company in a good position both in front of and behind the camera.

With its focus on offering quality content, the combined Scripps and Discovery-owned services – which include such networks as Food Network, HGTV, DIY, Discovery Channel, TLC, OWN, Animal Planet and Investigation Discovery – provide the company with programming and marketing synergies that further help build already strong brands, according to Discovery CEO David Zaslav, who addressed TV critics along with Discovery Chief Brand Officer and Factual Nancy Daniels, Chief Lifestyles Brand Officer Kathleen Finch, and Animal Planet Global President Susanna Dinnage.

“We have four of the top five [most watched] networks for women,” Zaslav said. “If we can promote across all of our networks the broad reach that we have now, we have the ability to tell people [watching] Food and HGTV that something great is going on over on TLC. Things are going better than expected and we’re having a good time.”

The executives said the merged networks will not change their respective programming strategies or brand focus under the new Discovery company, although Discovery Channel will now focus exclusively on the non-scripted business despite some ratings and critical success with recent scripted limited series Manhunt: The Unabomber and Harley and The Davidsons.

“[Both] projects were critically well received, but at the end of the day we decided to do what we do best and focus on non-fiction programming,” Daniels said. “There’s a lot of scripted content out there and its really hard to break through … we decided to focus on what we do best.”

Zaslav also alluded to a potential Discovery networks-based OTT service but would not reveal specific details. “We really see the media business as being two sides: one side is scripted series and movies, and we’ve moved away from that,” he said. “There are great companies competing against each other, and eventually they’re all going to be offering [OTT] services for $10 to $15,” he said. “We have everything else. We think an offering of all of our content for $6, $7 or $8 will look very different to consumers around the world. We like where we are right now.”

Discovery Inc. said it has extended the employment contract of CEO David Zaslav for five years, running through the end of 2023.

Zaslav, who joined Discovery in 2007 from NBC Universal,  has piloted Discovery through one of its greatest periods of growth. The company completed the $14.6 billion purchase of Scripps Networks Interactive in March and earlier this year announced that it will move its headquarters from Silver Spring, Md. to New York by 2019. 

Related: Zaslav Leaves NBC for Discovery 

“David has done a masterful job leading and growing Discovery over the last decade,” said Discovery board member and Liberty Media chair John Malone in a statement. “He is a visionary, a strategic builder and all around great guy. 

"Under David’s leadership, Discovery has scaled new heights becoming the leader in sports across Europe, building the leading global IP portfolio of high quality content, and positioning Discovery for continued global growth," Malone added. "We are lucky to have him.” 

Related: Discovery to Shut Down Maryland HQ, Move to NY 

Along the way Zaslav has helped refocus Discovery on the international market, buying European sports networks Eurosport in 2015, securing Olympic Games broadcast rights through 2024 and just last month, landing a 12-year, $2 billion deal for PGA Tour rights outside of the U.S. 

Related: Discovery Secures European Olympic TV Rights 

“I am thrilled,” Zaslav said in a statement. “Leading Discovery is my dream job. I would like to thank Discovery’s Board of Directors, fantastic management team, business partners, and all of our passionate superfans around the world for helping to make Discovery the unparalleled company it is today. Together, we are building something special. The new Discovery has the leading IP portfolio of beloved brands in the world, reaching viewers globally on every screen and service. 

"Being at Discovery for the past 11 years has been the privilege of my career," Zaslav added. "I am confident our brand strength, global platform and marketplace differentiation will ensure that Discovery continues to grow and deliver value to our viewers, partners and shareholders for many years to come.”

Related: Discovery Selects NY’s Flatiron District for New Headquarters 

As part of his new employment deal, Zaslav’s annual base salary will remain constant at $3 million, and he will be eligible for a $9 million bonus in 2018. According to the deal, that potential bonus will grow to a maximum of $22 million annually after 2019. Zaslav also will be eligible for additional stock option awards. A significant holder of Discovery stock, Zaslav has committed to hold the majority of his equity from stock grants to term, which the company said furthers the alignment of shareholder and management interests.

“A dynamic, creative, and passionate leader, David is a builder and an innovator, laser focused on creating value,” said Discovery chair Robert Miron in a statement. “This multi-year commitment affirms our confidence in David’s leadership, and on behalf of the entire Board of Directors, we are excited for David and his strong management team to drive further success and growth in this next chapter of the new Discovery.”

Watch MCN: Media's CEOs by the Numbers

Discovery Inc. has named Jane Latman general manager of Travel Channel, one of the networks Discovery acquired when it bought Scripps Networks Interactive.

Latman will continue to serve as executive VP, development and research, for Investigation Discovery and American Heroes Channel, and as general manager of Destination America.

Travel Channel didn’t have a general manager. The executives who had been in charge of programming for the network—Allison Page and Courtney White--were promoted to senior posts at HGTV and Food Network.

Related: Discovery Gives New Duties to Execs Schleiff, Page, White

Those networks, also from the SNI acquisition, are overseen by former Scripps executive Kathleen Finch, now Discovery’s Chief Lifestyle Brands Officer.

Earlier this month, Discovery Group president Henry Schlieff was put in charge of Travel Channel. Schlieff, who reports to Finch, also runs ID, American Heroes and Destination America.

“Jane is an unrivaled force in the television industry whose visionary creativity, natural leadership skills and passionate belief in collaboration make her one of the most, deservedly, respected executives in the industry,” said Schleiff. “I’m continually impressed by her ability to cultivate content that converts viewers into passionate fans – and, move a brand forward – a trait that will undoubtedly make her a successful steward at Travel Channel.”

Latman gets credit for creating programming that has powered ID from being the No. 50 network a decade ago to No. 1 today among women 25 to 54.

She joined Discovery in 2003.