AT&T in talks with Discovery to combine media assets

Details: According to Bloomberg, which first reported the news on Sunday, the companies are still figuring out how the deal would be structured.

• Variety suggests the companies could either combine their assets through a merger, or create joint venture, where they would both own part of the combined new media giant.
• AT&T recently formed a joint venture with private-equity giant TPG to offload its video assets, including its satellite TV brand DirecTV, its digital skinny bundle service "AT&T TV" and its internet-based TV service "U-Verse."

Be smart: AT&T and Discovery have both launched general entertainment streaming platforms in the past year, but neither HBO Max nor discovery+ come close to the number of subscribers of Disney+ or Netflix.

By the numbers: A merged company's subscriber numbers will still pale in comparison to the streaming giants.

• AT&T reported in January that it had 17.2 million HBO Max "activations." An activation is when someone that pays for its service, actually turns it on and uses it.
• Activations can come from someone purchasing the HBO Max digital streaming service as a standalone product, or from people who have purchased HBO — the premium cable channel — and have activated their complimentary HBO Max subscriptions.
• Because AT&T no longer reports "activations"  it's impossible to say just how many people pay for and have activated HBO Max as of today. A fair estimate would be around 20 million people. For now, HBO Max is only available domestically. It will start rolling out globally in June.

Between the lines: A combination of assets could result in a media company worth over $150 billion in enterprise value, per the Financial Times. Discovery today has a market cap of nearly $17 billion. Its value reflects its nearly $12 billion acquisition of Scripps Networks Interactive for in 2018.

• Discovery has used the content from the lifestyle cable networks it bought from Scripps, like Food Network and HGTV, to build its streaming service, discovery+. It also has international sports rights. It owns Eurosport, the European sports TV network and the GolfTV streaming network.
• AT&T’s crown jewel is HBO, the cable network if acquired via its acquisition of Time Warner and the namesake of its streaming service, HBO Max. It also owns CNN, worth about $10 billion, as well as other cable channels, like TNT and TBS — both of which have entertainment and live sports. AT&T also owns Warner Bros., the movie studio that sources say is worth around $40 billion.

Catch up quick: Analysts and investors have expressed concerns about AT&T's media strategy, since its $85 billion acquisition of Time Warner in 2018.

• In late 2019, AT&T faced pressure from activist investor Elliott Management, for not having a clear strategy for its purchase of Time Warner.
• Other telecom giants, like Verizon, have struggled to make sense of their media assets. Verizon this month sold its media arm, which includes AOL and Yahoo!, for $5 billion to private equity firm Apollo Global Management. It purchased both assets for around $10 billion just a few years earlier.

What to watch: While it’s still unclear how serious talks are between the two companies, some reports suggest the deal could be announced as soon as this week.