Are digital media companies -- Google, Netflix, Amazon, and Apple -- now laughing at the potential Discovery-WarnerMedia deal?

Those companies can still do media distribution and outspend the legacy media companies on content. Netflix -- a relative newbie in the digital media world -- will easily spend $17 billion this year on content alone.

Digging deeper, the potential WarnerMedia-Discovery combination reflects the relationship between media distribution and media creation, something digital media giants have figured out.

The deal looks to put the nail in the coffin of the TV industry's version of “vertical integration.” As TV Watch noted in the past only Comcast Corp. has successfully made a go of it, starting back more than decade ago -- a cable TV/communications company owing a TV network group/movie studio.

Seven years after that deal was completed, in 2018, AT&T, a major communications/mobile company bought Time Warner for $85 billion. This lasted just three years. It’s hard to say anything other than it ws a failure for AT&T. (And we haven’t even mentioned DirecTV.)

Who gains now? Discovery, for sure. It finally gets to move up a more than few notches in the media content world, expanding beyond its limited unscripted/reality TV programming world.

For sometime, Discovery has been behind when it comes to monetization and distribution of its linear, live TV networks -- versus the viewership it receives -- in part, due to its cable TV-centric unscripted programming model.

It doesn’t get those high affiliate fee/distribution revenues of ViacomCBS, NBCUniversal or Disney, which have a broadcast or cable TV network with sports TV programming. Pay TV content distributors -- older cable/satellite/telco companies, new virtual pay TV providers and streaming app/distributors (Roku, Amazon Fire TV) -- sit up, take notice and pay more.

Discovery also gets lifted in terms of advertising revenue -- adding more live, linear TV networks: TBS and TNT. Those channels not only have sports programming -- the NBA, for example -- but also scripted TV entertainment. One downside: Discovery still doesn’t have a bigger broadcast TV network, though in a streaming world that seems to matter less.

For AT&T, the bottom line is HBO Max wasn’t growing nearly as fast as Disney+. HBO Max says it has over 44 million U.S. subscribers one year after its launch. But 30 million or so have come from existing HBO cable TV subscribers.

While WarnerMedia converted many of those linear TV customers to streaming, the bottom line, real additive growth, has been slow. And compared to Disney+ rising subscribers it continues to lose ground.

Moving forward, Discovery-WarnerMedia not only have to reckon with Disney+ and Netflix when it comes to subscription revenues, but a larger digital world where advertising continues to be dominated by Google and Facebook.

Before you say this is too little, too late, ask yourself: What are the alternatives?