Warner, Discovery in shock merger talks

US telecoms giant AT&T is close to a deal to combine HBO, CNN and Cartoon Network owner WarnerMedia with factual juggernaut Discovery, according to reports.

Jason Kilar

The mammoth deal would see AT&T spin off its media business – formed following its US$108.7bn acquisition of Time Warner, now known as WarnerMedia, in 2018 – into a new entity together with Discovery, with an estimated value of US$150bn.

The proposed tie-up has sent shockwaves around Hollywood and was first reported by Bloomberg over the weekend.

Citing people with knowledge of the talks, the report claims a deal could be announced as soon as this week. Representatives for AT&T and Discovery have yet to comment on the story.

The merger would combine WarnerMedia’s significant assets in scripted and children’s content with Discovery’s considerable weight in factual and unscripted, coming soon after both companies entered the direct-to-consumer market with their own streaming services.

David Zaslav

HBO Max and Discovery+ are slowly expanding around the world, going up against competitors such as Netflix, Amazon Prime and Disney+ in the so-called Streaming Wars. Having launched in January, Discovery+ has now surpassed 15 million subscribers, according to the company’s latest quarterly results.

The merger would mark something of a U-turn for AT&T, which made a big bet on media only a few years ago, saddling itself with huge debts in the process. More recently, WarnerMedia CEO Jason Kilar has led a major restructuring of the business as it shifts away from cable and broadcast towards streaming.

Meanwhile, Discovery boss David Zaslav has also led a push into streaming and would be the exec chosen to lead the new company, should it be formed, according to reports.

Zaslav has led Discovery through several big IP moves in recent years including a US$14.6bn buyout of US cablenet operator Scripps Networks Interactive and its extensive back catalogue of home and lifestyle content in 2018, a US$1.4bn multi-year rights deal for coverage of the Olympics in Europe, and a buyout of European sportscaster Eurosport from France’s TF1. It has also invested heavily in live rights to golf, cycling and other sports.

The structure of the transaction remains up in the air and the talks could still fall apart, the Bloomberg report added.