AT&T, just three years after buying Time Warner, is in talks about combining its media businesses with Discovery and spinning them off.
The talks, first reported by Bloomberg, would create an entity that could create enough content to compete with Netflix and The Walt Disney Co., as the television business pivots to streaming.
When AT&T acquired Time Warner, converting it into WarnerMedia, it jettisoned long-time executives and restructured the company to support HBO Max, its own streaming service.
The company had to convert HBO subscribers to HBO Max and, slowly at first, has been adding subscribers. Last month AT&T said it had 44.2 million HBO and HBO Max subscribers at the end of the first quarter.
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Meanwhile the WarnerMedia cable network portfolio faces the cord cutting has eaten into the industry’s distribution revenue growth. CNN, WarnerMedia’s news network thrived during the election and its aftermath, but its ratings have fallen in recent months.
Discovery also launched its own direct-to-consumer service, Discovery Plus, in January. It relies on lower-cost unscripted programming and charges a lower monthly fee.
Discovery most recently reported having 15 million direct to consumer subscribers at the end of the first quarter.
Disney Plus last week reported having 103.6 million subscribers, fewer than Netflix, the leader with 208 million subscribers.
A merged company would also have to choose a leader between WarnerMedia CEO Jason Kilar and Discovery’s chief David Zaslav, the Bloomberg report noted.
For AT&T the deal would unwind its strategy of trying to combine content assets with its cellphone and broadband distribution businesses. It took on billions of dollars of debt buying first DirecTV, then Time Warner.
AT&T agreed to spin off DirecTV in March.
Investors have questioned AT&T's strategy and have suggested WarnerMedia be combined with NBCUniversal, the programming division of Comcast, which has also pursued a strategy of combining distribution and content assets, only to face recent criticism.
