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AT&T and Discovery in Talks for Programming Tie-Up: Reports

CNN, HBO could come under the same umbrella as Food Network and Animal Planet, according to reports of AT&T and Discovery deal.
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Media powerhouses CNN, HBO, and the Cartoon Network could soon come side-by-side with those of HGTV, the Food Network and Animal Planet if reports of a tie-up between AT&T  (T) - Get AT&T Inc. Report and Discovery  (DISCA) - Get Warner Bros Discovery Inc Com Ser A Report prove true. 

The telecom and entertainment companies are said to be in talks that could see them join TV and film offerings, according to reports by Bloomberg and the Wall Street Journal on Sunday that have been so far murky on details. Bloomberg first reported early Sunday that AT&T and Discovery are discussing combining "content assets," and the Wall Street Journal later hinted that a new entity could be created.  

Such an arrangement could potentially create an entertainment tie-up that would better compete with other streaming media names like Disney  (DIS) - Get The Walt Disney Company Report, whose arsenal includes Disney+, and Netflix  (NFLX) - Get Netflix Inc. Report and Amazon  (AMZN) - Get Inc. Report. The deal also could reportedly give AT&T shareholders a stake in a new entertainment entity. 

"We do not comment on rumor and speculation," said AT&T spokesman Fletcher Cook when contacted by TheStreet on Sunday for comment on the report.

Discovery did not respond to a phone and email messages on Sunday.

Both reports on the possible deal relied on unnamed sources speaking with knowledge of the talks between the two companies, but offered few details. Bloomberg said that something could be announced as early as this week, but that negotiations could also fall apart.

The report in the Wall Street Journal, however, said that the talks between the two companies are "advanced" and that a deal could be reached by Monday. "AT&T shareholders would own a big stake in the new entity," according to the Journal, which also relied on unnamed sources.

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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 streaming video.

Both Discovery and AT&T have been building up their media offerings in recent years, with AT&T snapping up Time Warner Inc. in 2018, allowing it to provide movies and shows from Warner Bros., HBO and Turner, including TBS and TNT channels, along with targeted entertainment from Bleacher Report, FilmStruck and Otter Media.

The 30-year-old Discovery -- formerly Discovery Communications -- meanwhile is available in 220 countries and territories and its menu includes Food Network Kitchen, MotorTrend OnDemand, Group Nine Media and premium brands like the Discovery Channel, Travel Channel, MotorTrend, Science Channel and the Oprah Winfrey Network, or OWN. 

AT&T reported a quarterly earnings beat earlier this month, showing sales of $43.9 billion and earnings per share of $0.86. Discovery reported late last month showing mixed results, with total revenue of $2.792 billion beating expectations, but earnings per share of $0.21 missing analysts' expectations. 

DISCA closed up slightly on Nasdaq on Friday to $35.65 while T closed up slightly to $32.24 on the New York Stock Exchange.

(Amazon and Disney are holdings in Jim Cramer's Action Alerts PLUS member club.)

This story has been updated.