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Netflix, Disney Shares Slide on $43 Billion A&T - Discovery Media Merger

With nearly 150 million in combined subscribers and a pledge to spend $20 billion a year on new content, the newly-created AT&T/Discovery media group poses a huge challenge to streaming giants such as Netflix and Disney.

Netflix  (NFLX) - Get Netflix Inc. Report shares traded lower Monday, with streaming rivals including Comcast  (CMCSA) - Get Comcast Corporation Class A Common Stock Report and Walt Disney  (DIS) - Get The Walt Disney Company Report trading further in the red, as investors reacted to a potentially media sector-changing merger deal between AT&T  (T) - Get AT&T Inc. Report and Discovery  (DISCA) - Get Warner Bros Discovery Inc Com Ser A Report.

Discovery CEO David Zaslav told investors on a conference call Monday that the combined group would spend $20 billion a year on new content while holding on to its CNN network and "leaning in" to news coverage. 

That level of viewership, as well as the slowing subscriber growth rates for streaming groups like Netflix and Disney, has investors re-setting expectations for new additions and development in an increasingly competitive market.

Netflix said last month that it expects to add around 1 million new subscribers to its streaming service -- the largest in the world -- this quarter, a figure came in well shy of Street forecasts of around 4.8 million. The estimate followed a weaker-than-expected March quarter tally of 3.98 million, which also missed analysts' estimates of a 6.25 million total.

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Disney, for its part, posted a 13% decline in group revenues, to $15.61 billion, and an overall subscriber total for its Disney+ streaming services of 94.9 million, both of which fell shy of analysts' estimates.

The bulk of Disney's operating profits came from its media division, which earned $2.9 billion, while its pandemic-hit theme park business lost another $406 million. 

For Comcast, whose NBCUniversal business generated $7.02 billion in revenues last quarter, subscribers to its recently-launched Peacock network rose 27.2%, to 42 million. 

Netflix shares were marked 0.6% lower in early trading Monday to change hands at $490.90 each, a move that would extend the stock's year-to-date decline to around 9%. 

Comcast shares were marked 1.7% lower at $57.68 each, narrowing its year-to-date gain to around 10.2% while Disney fell 1.2% lower to $171.60 each.