US telecoms giant AT&T has agreed to combine its WarnerMedia business with Discovery in a deal to create a new streaming giant.
The tie-up brings one of Hollywood’s biggest studios and Discovery’s channels under the same ownership.
AT&T owns CNN, HBO and Warner Bros, after acquiring many brands in a $108.7bn (£77.1bn) purchase of Time Warner in 2018. The deal also marks the entry of another player into a crowded market.
The proposed merger would put together movie giant Warner Bros. Entertainment, which owns the Harry Potter and Batman franchises, with Discovery’s home, cooking, nature and science shows.
“This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms,” said AT&T chief executive John Stankey.
“It will support the fantastic growth and international launch of HBO Max with Discovery’s global footprint and create efficiencies which can be re-invested in producing more great content to give consumers what they want.”
WarnerMedia-owned HBO and HBO Max now have around 64 million subscribers worldwide, with hits such as Game of Thrones and Succession under its belt.
But it is currently dwarfed by larger rivals Netflix, which has 208 million subscribers, and Disney+, which has more than 100 million.
Discovery, whose portfolio includes Animal Planet and the Discovery Channel, reaches more than 88 million US homes, while its Discovery+ streaming service, which launched in January, has 15m subscribers.
Discovery’s president and chief executive David Zaslav is set to lead the joint company, according to AT&T.
Under the terms of the deal, AT&T will receive $43bn and its shareholders will own 71% of the new company, while Discovery shareholders will hold 29%.
The new media company will be able to invest more in original streaming content to compete, the companies said. It will house almost 200,000 hours of programming and bring together more than 100 brands under one global portfolio, including: DC Comics, Cartoon Network, Eurosport, Magnolia, TLC and Animal Planet.
The deal is expected to close by the middle of next year. It still needs approval from Discovery shareholders. AT&T stockholders don’t need to vote on the transaction.