The parent company of CNN, HBO and the Hollywood studio behind the Batman and Harry Potter franchises, is in talks to forge a $150bn (£106bn) tie-up with Discovery to take on streaming services Netflix and Disney+.
US telecoms company AT&T, which acquired the media assets in an $85bn takeover of Time Warner just three years ago, wants to offload its media content division, now known as WarnerMedia, into a separate business in combination with Discovery.
The deal, which could be announced within days, will create a content powerhouse spanning Warner Bros film and TV, the HBO network behind hits including Game Of Thrones, Succession and The Sopranos, and Discovery’s stable of reality-TV shows in genres including nature, cooking and home improvement.
AT&T, which has a market value of $230bn, is expected to control most of the new publicly listed company. However, David Zaslav, the chief executive of Discovery, which has a market value of about $30bn, has been tipped to run the business.
The deal marks the latest round of consolidation in recent years as broadcasting, media and tech companies seek scale to compete globally in the streaming age.
In the past 18 months a swathe of new streaming services have launched, with Disney+ racing to more than 100 million subscribers, Netflix topping 200million and Amazon’s Prime Video estimated to have in excess of 150 million regular users.
A deal between AT&T and Discovery would aim to create a new player with the content and scale to compete.
WarnerMedia–owned HBO and its HBO Max streaming service have about 64 million subscribers worldwide. Discovery, which owns networks including Animal Planet and the flagship Discovery Channel, reaches more than 88m US homes and has attracted 15 million subscribers to its Discovery+ streaming service which launched in January.
AT&T’s strategic reversal will see it focus on its core telecoms business and the rollout of 5G mobile networks and full fibre broadband. AT&T recently spent $23bn in a US government auction of 5G spectrum.
In February, AT&T agreed to sell a majority stake in the satellite TV service DirecTV, which has been losing tens of millions of customers as voters move to streaming, in a deal that valued the business at a quarter of the $48.5bn it was acquired for in 2015.