Warner Bros. Discovery is splitting into two separate firms — a dramatic shakeup that can create one division targeted on streaming and Hollywood blockbusters and the opposite on cable TV and world networks.
The corporate is making an attempt to adapt to a world the place cable TV is fading quick and streaming is king.
One firm — tentatively referred to as International Networks — will maintain acquainted cable channels like CNN, TBS and TNT in addition to worldwide belongings and the Discovery+ streaming service.
It’ll additionally personal sports activities content material like Bleacher Report.
The opposite firm — Streaming & Studios — will embody HBO Max, Warner Bros. film studios and its tv manufacturing arm, which makes fashionable reveals and movies.
Warner Bros. Discovery stated this transfer will make each firms stronger by permitting every one to deal with what it does greatest. It additionally believes traders will worth the separate firms greater than the mixed one.
Warner Bros. Discovery CEO David Zaslav stated the transfer is geared toward “empowering these iconic brands with the sharper focus and strategic flexibility they need to compete most effectively in today’s evolving media landscape.”
This variation is basically a reversal of the 2022 merger between Warner Media (then owned by AT&T) and Discovery Communications — a deal that aimed to create a content material powerhouse spanning status movies and unscripted actuality TV.
Conventional cable TV is quickly shedding viewers as folks swap to streaming platforms like Netflix, Amazon Prime Video and Disney+.
Income from cable subscriptions is shrinking, and promoting {dollars} are following go well with.
Warner isn’t the one firm reacting to this shift. Comcast can be spinning off its cable networks right into a separate firm referred to as Versant by the top of the 12 months.
Within the first three months of 2025, Warner’s cable community income dropped 6% from the identical interval final 12 months — but these networks nonetheless introduced in more cash than another a part of the corporate.
Even so, traders and analysts see the writing on the wall: cable is on the decline.
Zaslav will keep on as the pinnacle of the brand new Streaming & Studios enterprise, whereas present CFO Gunnar Wiedenfels will take over as CEO of International Networks.
Zaslav has been beneath stress these days. Since Warner Bros. Discovery was shaped, its inventory has fallen practically 60%.
Final week, 59% of shareholders voted towards his huge $51.9 million pay package deal for 2024 — a robust signal of investor frustration.
Earlier this month, the credit score company S&P International downgraded Warner’s debt to “junk” standing, citing issues concerning the declining cable enterprise. In easy phrases, meaning traders see the corporate’s debt as dangerous.
Warner Bros. Discovery is carrying round $34 billion in debt, a lot of it taken on in the course of the authentic merger. An enormous chunk of that debt will stay with International Networks.
To handle the cut up, the corporate secured a $17.5 billion short-term mortgage from JPMorganChase, which the 2 new firms will assist repay by issuing new debt of their very own.
International Networks is anticipated to make use of earnings from its 20% stake in Streaming & Studios to chip away at what it owes.
The corporate says this breakup will assist each companies develop and even make room for brand spanking new offers or acquisitions.
“The separation will enable both companies to focus on their strengths,” Wiedenfels stated.
