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AT&T in talks to spin off WarnerMedia for merger with Discovery

AT&T intends to break off its media arm and merge the assets with Discovery, in what could be a bid to strengthen the organization against streaming rivals such as Netflix, Disney, and Apple.

AT&T is believed to be preparing to make a deal with Discovery that could create a new media behemoth, one that could be announced within the next week. If agreed, the deal would see AT&T spin off its media assets from the rest of the company, and then those assets would be combined with Discovery into a new entity.

According to sources of Bloomberg, the two organizations are still negotiating the structure of the transaction, and it could still collapse at this late stage.

The deal would create an organization that combines the properties owned by AT&T's WarnerMedia unit and Discovery. WarnerMedia includes CNN, HBO, Cartoon Network, TBS, TNT, and the Warner Bros. studio, while Discovery controls networks including HGTV, Food Network, TLC, and Animal Planet.

If true, the deal would see AT&T cast off its media assets, which it acquired in an $85 billion acquisition in 2018. At the time, the deal made one of the largest media conglomerates in the world, something the new arrangement will also produce.

The move could give the two organizations a major leg up in the streaming stakes. While WarnerMedia contols HBO Max, Discovery also has its own streaming service called Discovery+.

A merger could potentially lead to the two services joining together into a single platform down the road, or at least some synergies between them.

Currently, the streaming landscape is dominated by Netflix, Amazon, and Disney, but it also includes Apple with its Apple TV+ service. Though the introduction of HBO Max may be a worry for some streaming services, a join-up with Discovery will form a serious competitor.

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