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Illustration: Annelise Capossela/Axios

AT&T is in talks with media giant Discovery about merging its media assets, like CNN, TBS and TNT, according to two sources familiar with the discussions.

Why it matters: A potential merger could allow AT&T and Discovery to better compete with entertainment giants like Disney and Netflix in the video streaming wars.

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.

Data: Company filings; Chart: Axios Visuals

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.

Go deeper

3 hours ago - World

Canada First Nation finds mass grave at another school site

A memorial around the Centennial Flame on Parliament Hill in Ottawa, Ontario, Canada, on June 4, honoring 215 Indigenous children found buried in an unmarked, mass grave at a one-time residential school in Kamloops, British Columbia. Photo: David Kawai/Bloomberg via Getty Images

A First Nation in Canada said Wednesday "hundreds" of unmarked graves have been discovered at the site of a former residential school in the prairie province of Saskatchewan.

Of note: The Cowessess First Nation said in a statement the number of graves found are "the most significantly substantial to date in Canada" — suggesting it's more than the remains of 215 Indigenous children discovered last month at a former residential school site in Kamloops, British Columbia.

Biden replaces FHFA director after Supreme Court ruling

Mark Calabria, then-director of the Federal Housing Finance Agency, during a Senate hearing on Capitol Hill in 2020. Photo: Astrid Riecken/ Pool/Getty Images

The White House on Wednesday replaced the regulator who oversees mortgage giants Fannie Mae and Freddie Mac, hours after a Supreme Court ruling enabled President Biden to oust the Trump appointee.

Why it matters: The removal of libertarian economist Mark Calabria as Federal Housing Finance Agency (FHFA) director gives Biden more control over the fate of Freddie and Fannie, "which play an outsize role in the housing market and are central to many homeowners' ability to afford homes," per the New York Times.

Sen. Sheldon Whitehouse under scrutiny for elite club affiliations

Sen. Sheldon Whitehouse during a Senate hearing on Capitol Hill in February. Photo: Susan Walsh-Pool/Getty Image

Sen. Sheldon Whitehouse (D-R.I.) said in a statement Wednesday that he is a member of an exclusive Rhode Island sailing club that lacks diversity.

Why it matters: Whitehouse has repeatedly spoken out against systemic racism and come under scrutiny this week for his family's affiliation with elite clubs. This is the second such club accused of lacking diversity that the senator has been linked to in recent days

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