Warner Bros. to Split Into Streaming, TV Companies

Warner Bros. Discovery Inc. is splitting itself in half, unshackling its fast-growing streaming business from the struggling legacy media channels and setting up two independent companies that could pursue deals on their own.

The new Global Networks business 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. It will hold a 20% stake in the other Streaming and Studios business, headed by Chief Executive Officer David Zaslav, and use proceeds from that entity as a way to cut debt, the company said in a statement on Monday. 

Bloomberg's Geetha Ranganathan reports.

The move unwinds much of the 2022 merger that combined AT&T Inc.’s WarnerMedia, which houses iconic film studios and TV franchises, and Discovery Inc., 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 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. He added that each business would attract a very different set of investors.

Warner Bros. late last year already shifted its organizational 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% as the market opened in New York but had pared some of those gains by mid-morning.

The Global Networks division will include some streaming assets, such as Discovery+ and CNN’s planned streaming news platform, as well as Warner Bros.’ sports broadcasting rights. The company will also house a significant portion of Warner Bros.’ nearly $35 billion in debt. Zaslav said Global Networks will continue to generate “significant cash flow” that will be used mostly to pay off the debt.

Warner Bros. said separately it will raise a bridge loan from JPMorgan Chase & Co. of $17.5 billion, which is expected to be recapitalized before the split. Warner Bros. has already paid down almost $20 billion in debt. 

US media groups have struggled to improve their profitability in the face of an expensive streaming war against Netflix Inc. 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 reported declining revenue and subscribers in its cable network division, and its shares have suffered. The stock was down 7% this year through Friday’s close and down more than 60% 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.

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