AT&T Exploring Combination Of Media Assets With Discovery - Deadline

AT&T and Discovery are pursuing a merger of their entertainment assets that would reshape the media business, particularly the fast-growing realm of streaming.

A person familiar with the situation confirmed to Deadline that talks are ongoing. The configuration is said to be a joint venture, with details still being finalized. WarnerMedia had already been talking with NBCUniversal about a similar arrangement in recent months, though those discussions did not end up bearing fruit.

Bloomberg, citing unidentified sources, had the first report, said a deal could be announced as soon as this week.

A Discovery rep declined to comment on the report when contacted by Deadline. AT&T did not immediately respond to a request for comment.

The report didn’t break down exactly how the assets would be combined, but Discovery brings a raft of well-established networks like HGTV, Food Network, TLC and Discovery. AT&T, through its WarnerMedia division, has HBO, Warner Bros and Turner networks CNN, TNT, TBS and several others.

Both companies have recently joined the streaming frenzy. WarnerMedia launched HBO Max in May 2020. Discovery rolled out Discovery+ in January in the U.S. and started expanding it globally. HBO Max will go global starting next month and also introduce a cheaper, ad-supported tier.

Bundling, which has already begun at companies like Disney and is widely seen as inevitable in the cutthroat streaming sector, could be an option in a combined entity. Discovery+ focuses entirely on unscripted programming. HBO Max has played in that realm to some degree, but scripted fare remains its bread and butter.

After major stumbles in the months after it launched, the service has gained traction in recent months, adding 2.7 million subscribers in the first quarter to reach 44.2 million in combination with linear HBO. Executives have credited Warner Bros films premiering on HBO Max at the same time they reach theaters, as well as buzzy HBO shows like The Undoing and Max Originals like The Flight Attendant.

The Warner Bros film operation under Toby Emmerich has made steady progress during a time of industry upheaval and the headlong rush into streaming. Films on the studio’s slate, including Godzilla vs. Kong and Mortal Kombat have managed to pull in sizable box office while also enticing HBO Max subscribers. GvK has taken in almost $100 million in the U.S. and more than $400 million worldwide despite theaters in many regions still being shuttered, along with 40% of North America.

The report is hitting as both companies prepare to deliver high-stakes pitches to advertisers during the annual week of upfront presentations. This year’s upfronts will be virtual due to Covid-19 safety considerations. Discovery’s presentation is on Tuesday and WarnerMedia’s is Wednesday.

A deal would be a major surprise for AT&T, which has made a number of moves in the past three years to chip away at the sizable debt it piled up from the acquisition of Time Warner. That $85 billion deal, which closed in 2018 after a federal antitrust trial, was followed by the shedding of a number of assets.

AT&T in February took a big step toward moving the lagging satellite pay-TV operator DirecTV off its balance sheet, selling 30% of it to private equity firm TPG. The spinout valued the enterprise at $16.25 billion, a steep discount from the $49 billion AT&T paid to acquire DirecTV in 2015.

Discovery absorbed Scripps Networks Interactive in a $14.6 billion transaction that closed in 2018. After the combined company managed through a period when all cable programmers saw viewership and advertising decline, it shifted to direct-to-consumer streaming this year. Last month, the company said it had reached 13 million subscribers, but the expense of rolling it out took a toll on first-quarter income.

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