[NEW YORK] Warner Bros Discovery is splitting itself into two publicly traded companies, one with its HBO Max streaming service, film and television business, and the other with its struggling cable business.
The Global Networks division will include entertainment, sports and dozens of cable television brands such as CNN, TNT and TBS and will be headed by chief financial officer Gunnar Wiedenfels. The division will hold a 20 per cent stake in the other Streaming and Studios business, using proceeds from that entity as a way to cut debt, the company said in a statement on Monday (Jun 9). Warner Bros chief executive officer David Zaslav will head up the Streaming and Studios business.
Warner Bros late last year already shifted its organisational structure into two divisions, as consumers shift away from traditional pay-TV to new online options. Monday’s announcement takes that effort one step further and will allow each unit to “pursue important investment opportunities and drive shareholder value,” Wiedenfels said in the statement. The stock jumped as much as 13 per cent per cent as the market opened in New York.
The move unwinds much of the 2022 merger that combined AT&T’s WarnerMedia, which houses iconic film studios and TV franchises, and Discovery, home to nonfiction documentaries and reality TV. The deal created a company weighed down with debt at a time when cable TV, its largest business, was hemorrhaging viewers and advertising US dollars.
“The decision to separate Warner Bros Discovery reflects our belief that each company can now go further and faster apart than they can together,” Zaslav said on a call with investors.
Warner Bros said separately it will raise a bridge loan from JPMorgan Chase of US$17.5 billion, which is expected to be recapitalized before the split. Zaslav said Warner Bros has already paid down almost US$20 billion in debt.
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US media groups have struggled to improve their profitability in the face of an expensive streaming war against Netflix and Amazon Prime. Comcast Corp has taken a similar path, dividing NBCUniversal into Versant – which will own cable networks like MSNBC and USA – and the rest, including the NBC broadcast network, streaming service Peacock and the Universal Studios theme parks.
Analysts have predicted a wave of consolidation as companies try to recover from a post-pandemic slump. Warner Bros has suffered declining revenue and subscribers in its cable network division, and its shares have suffered. The stock was down 7 per cent this year through Friday’s close and down more than 60 per cent since the merger three years ago.
“Nowhere in the announcement of the merger did any of the principals acknowledge the attrition of the linear TV business, which was painfully evident,” when Warner Bros and Discovery merged, said Paul Verna, vice-president of content at EMarketer. Like the recent pivot back to HBO Max, “this move reveals a company fumbling its way through disruption.”
The separation is expected to be completed by mid-2026, the company said, subject to closing and other conditions. Wiedenfels said he expects the two entities to be valued equally.
“The whole concept of this separation is to create two strong, very well-positioned companies,” Wiedenfels said. BLOOMBERG
