AT&T may announce this week a decision to spin off its media content subsidiary WarnerMedia in a way that would allow it to merge with Discovery Communications, creating a content and streaming juggernaut that would be better poised to compete against Netflix, Amazon Prime and Disney Plus.
The proposal was first reported Sunday afternoon by the financial news outlet Bloomberg and later confirmed independently by other news organizations.
The deal could be announced as early as this week, according to some news outlets who cited anonymous sources. It is unclear what regulatory or other hurdles the proposed merger of media assets would have to clear in order to be formally approved.
The new company would be led by David Zaslav, the current chief executive of Discovery Communications. Subsidiaries covered by the merger would include HBO, CNN, the Cartoon Network and WarnerMedia’s streaming service HBO Max, according to sources who spoke with other outlets.
Those sources said the discussions were in advanced stages, and some said an announcement could come as soon as Monday, though others cautioned that the deal was not finalized and could still fall apart.
If one does come to fruition, AT&T’s WarnerMedia would be spun off into a separate company that would merge operations with Discovery Communications. AT&T’s shareholders would become a majority owner of the new company, according to the New York Times.
The move would allow AT&T to shed the second part of its media empire — it sold off a minority stake in its DirecTV unit to TPG Capital earlier this year — in a way that would allow it to focus more on building out its telecommunications network, including prioritizing advancements in its next-generation 5G wireless offerings.
AT&T has tried to leverage its content to draw and retain wireless and video customers — some subscribers get HBO Max for free — a move that has been copied by some of its rivals, including Verizon with Discovery’s newest streaming service Discovery Plus.
It remains unknown if AT&T’s customers would continue to get complementary access to HBO Max and if Discovery would continue its deal with Verizon if a merger between the two content brands goes through.