AT&T in Talks to Combine Media Assets, Including CNN, With Discovery
By Cara Lombardo, Dana Cimilluca and Drew FitzGerald
AT&T Inc. is in talks to combine a big portfolio of media
assets, including CNN, with Discovery Inc., according to people
familiar with the matter, a deal that would mark a major strategy
shift for the telecom giant as the traditional TV business faces
The talks, which cover CNN and other parts of AT&T's
WarnerMedia division, including the TNT and TBS cable channels, are
advanced, and an agreement could be reached by Monday, the people
said. Should there be a deal, AT&T shareholders would own a big
stake in the new entity, some of the people said. The people
cautioned that a deal isn't done yet and the talks could still fall
apart. Other details of the potential transaction couldn't be
A deal between WarnerMedia and Discovery, whose portfolio
includes its namesake network and HGTV, would further consolidate a
media business buffeted by cord-cutting and competition from
The talks signal a major pullback by AT&T, which placed a
massive bet on media with its 2018 acquisition of Time Warner Inc.
for around $81 billion. That deal made it the world's most indebted
Bloomberg earlier reported that AT&T was in talks to combine
media assets with Discovery.
Both AT&T and Discovery face daunting challenges in the
traditional TV business, as more consumers go without cable and
satellite TV connections. Since 2010, about 35 million households
have dropped their subscriptions to pay-TV channel packages or have
skipped signing up in the first place, according to market research
firm MoffettNathanson LLC.
AT&T has staked much of its future in media on HBO Max, an
expanded online version of the premium cable channel that is
designed to compete with big rivals like Netflix Inc. and Disney+.
Discovery, which specializes in nonfiction programming, has its own
streaming service called Discovery+.
AT&T has had opportunities in recent years to divest CNN,
which was regularly attacked by former President Trump. But the
telecom company held on to it, viewing the network as a valuable
financial contributor. CNN's ratings boomed during election season,
thrusting it into the top spot in total prime-time viewership, but
the network has lost ground amid a wider decline in news ratings.
Fox News regained the No. 1 spot in that category.
TNT and TBS carry general entertainment programming, but much of
their value is in their rights to air major sporting events,
including NBA basketball and college basketball's "March Madness"
tournament. Some employees in these cable channels -- once known as
the Turner networks -- have complained AT&T has starved them of
resources and attention, as it favors HBO Max. AT&T executives
have disputed that charge. WarnerMedia Chief Executive Jason Kilar
said at a recent investor conference that a recent seven-year deal
to air National Hockey League games was "a sign to the market that
we are investing in the Turner networks" for the long haul.
AT&T still earns most of its profits from mobile-phone and
broadband service. Its reported net debt surged to $169 billion at
the end of March following an expensive Federal Communications
Commission auction for wireless spectrum licenses. The Dallas-based
company will need to spend billions of dollars over the coming
years to build and maintain an ultrafast fifth-generation wireless
network that can keep up with rivals T-Mobile US Inc. and Verizon
AT&T had talks in recent years with Discovery and HGTV owner
Scripps Networks before Discovery acquired it in 2018, according to
people familiar with the matter. Some investors have since
complained about AT&T's stewardship of its media assets and the
debt it amassed to close the Time Warner deal. Shares closed Friday
at $32.24, down about 25% since mid-2016.
The business is now a conglomerate pulled in several directions
by its debt load, its obligations as a telecom network operator and
the big-budget outlays of its film and TV studios. The company also
pays a quarterly dividend that costs about $15 billion a year. Its
board last year froze the dividend amount after more than 30 years
of annual increases but stopped short of cutting a payout that many
investors depend on for steady income.
The channels at the heart of WarnerMedia's TV business are the
latest in a series of assets assembled by former AT&T Chief
Executive Randall Stephenson that are now on the block. The
wireless giant earlier this year reached a deal with private-equity
firm TPG to shed a 30% stake in its DirecTV business for $1.8
billion. Most of the pay-TV unit consists of satellite-TV
operations that the company bought in 2015 for $49 billion.
John Stankey, who became CEO of the conglomerate last year, has
said he would treat no asset as sacred and can shed any business
that doesn't contribute to its parent's overall value. At the same
time, he has said the company remains committed to HBO Max as the
cornerstone of an entertainment business that keeps wireless and
broadband customers engaged while earning a healthy profit
Discovery, known for TV shows such as "90 Day Fiancé" and
"Diners, Drive-Ins and Dives," has recently stepped up its
investment in the streaming-video sector. The company placed most
of its shows into a single streaming service called Discovery+ and
operates niche services such as Eurosport Player and Food Network
Kitchen. Together, Discovery's streaming services have 15 million
--Benjamin Mullin contributed to this article.
Write to Cara Lombardo at email@example.com, Dana Cimilluca
at firstname.lastname@example.org and Drew FitzGerald at
(END) Dow Jones Newswires
May 16, 2021 14:12 ET (18:12 GMT)
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