A deal between WarnerMedia and Discovery, whose portfolio includes its eponymous network and HGTV, would further solidify a media company rocked by cord-cutting and streaming video competition.

The talks signal a major pullback from AT&T, which made a massive bet on media with its 2018 acquisition of Time Warner Inc. for around $ 81 billion. This agreement made it the most indebted non-financial corporation in the world.

Bloomberg earlier reported that AT&T was in talks to combine media assets with Discovery.

AT&T and Discovery both face significant challenges in the traditional television industry as more and more consumers do without cable and satellite television connections. Since 2010, about 35 million households have abandoned their pay-TV package subscriptions or skipped signing up in the first place, according to market research firm MoffettNathanson LLC.

AT&T has staked much of its future in the media on HBO Max, an extended online version of the premium cable channel designed to compete with big streaming rivals like Netflix. Inc.

and Walt Disney Co.

it’s Disney +. Discovery, which specializes in non-fiction programming, has its own streaming service called Discovery +.

AT&T has had the opportunity in recent years to sell CNN, regularly attacked by former President Trump. But the telecommunications company clung to it, seeing the network as a valuable financial contributor. CNN’s ratings exploded during the election season, propelling it to the number one spot in total prime-time viewers, but the network lost ground amid a broader drop in ratings. Fox News regained the top spot in this category.

Fox News parent company Fox Corp. and the parent company of Wall Street Journal News Corp share common ownership.

TNT and TBS provide general entertainment programming, but much of their value lies in their rights to broadcast major sporting events, including the NBA basketball tournament and the “March Madness” basketball tournament. college ball. Some employees at these cable channels – formerly known as the Turner Networks – have complained that AT&T has deprived them of resources and attention because it promotes HBO Max. AT&T executives disputed this accusation. WarnerMedia chief executive Jason Kilar told a recent investor conference that a recent seven-year agreement to broadcast National Hockey League games was “a sign to the market that we are investing in them. long-term Turner networks.

AT&T still derives most of its profits from mobile telephony and broadband services. Its reported net debt jumped to $ 169 billion at the end of March following a costly Federal Communications Commission auction for wireless spectrum licenses. Dallas-based company will have to spend billions of dollars over the next few years to build and maintain an ultra-fast, fifth-generation wireless network that can keep pace with rivals T-Mobile US Inc.

and Verizon Communications Inc.

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 handling of its media assets and the debt it had accumulated to secure the deal with Time Warner. Shares closed at $ 32.24 on Friday, down about 25% since mid-2016.

The company is now a conglomerate pulled in several directions by its debt, its obligations as a telecommunications network operator and the big budget spending of its film and television studios. The company also pays a quarterly dividend which costs around $ 15 billion per year. Last year, its board of directors froze the dividend amount after more than 30 years of annual increases, but stopped before cutting a payment that many investors depend on for stable income.

The channels at the heart of WarnerMedia’s TV business are the latest in a series of assets assembled by former AT&T CEO Randall Stephenson who are now on the block. Earlier this year, the wireless giant struck a deal with private equity firm TPG to sell a 30% stake in its DirecTV business for $ 1.8 billion. The bulk of the pay-TV unit is made up of satellite TV operations that the company bought out in 2015 for $ 49 billion.

John Stankey, who became CEO of the conglomerate last year, said he would not treat any assets as sacred and he could abandon any business that does not contribute to the overall value of his parent company. At the same time, he said the company remains committed to HBO Max as the cornerstone of an entertainment business that keeps wireless and broadband customers engaged while making a healthy profit on its own.

Discovery, known for its television shows such as “90 Day Fiancé” and “Diners, Drive-Ins and Dives”, recently stepped up its investments in the video streaming industry. The company has put most of its shows in a single streaming service called Discovery + and operates niche services like Eurosport Player and Food Network Kitchen. Together, Discovery’s streaming services have 15 million subscribers worldwide.

—Benjamin Mullin contributed to this article.

Write to Cara Lombardo at [email protected], Dana Cimilluca at [email protected] and Drew FitzGerald at [email protected]