Discovery Warner Bros. plans to divide into two public companies by next year, the media giant announced on Monday, the last upheaval of the industry while consumers go from cable to streaming.
WBD will separate into a streaming and studios company, which will include its films properties and its HBO Max streaming service, and a global network company, which will include CNN, TNT Sports and Discovery, among other companies.
CEO David Zaslav will direct the streaming and studios company. The current CFO Gunnar Wiedenfels will become CEO of the Global Networks activity.
Warner Bros. Discovery plans to finish the split in the middle of 2026.
“By operating as two distinct and optimized companies in the future, we empower these emblematic brands with the clearer concentration and the strategic flexibility they need to compete with the evolving media landscape of today,” Zaslav said in a press release.
The news confirms the previous reports of CNBC and others that WBD envisaged such separation. In December, the company announced the restructuring that many considered as a precursor of a complete break.
Warner Bros.'s Discovery actions. increased by more than 2% at noon, merchant on Monday.
Cutting cable
Nurphoto | Nurphoto | Getty images
Warner Bros. Discovery joins the Comcast cable giant to separate its traditional remuneration television networks from its wider media activity.
ComcastNbcuniversal is currently transforming its portfolio of wired networks, including CNBC, into a new company listed on the stock market called slope. Nbcuniversal will continue to supervise the Peacock streaming service, the NBC broadcasting network and cinema, among other active.
WBD has the largest portfolio of cable television networks, born from the 2022 merger between Warner Bros. And Discovery, which brought together channels like CNN, TBS and TNT with Discovery, TLC and HGTV.
Warner Bros.'s moves. Discovery and Comcast are involved while the industry faced the loss of customers of the traditional paid television bundle in favor of streaming.
A key goal has been to create streaming platforms and particularly achieve profitability.
The traditional trail of paid television in the wider media sector was presented last year when WBD declared an assembly of $ 9.1 billion on its television network activities. The company said that this decision had been triggered by a reassessment of the accounting value of the television networks segment.
However, traditional television networks remain profitable and generate large amounts of money. Live sports broadcast on traditional television always bring the most general public, which makes sports essentials to the portfolio of most media companies.
Wiedenfels noted during a call with investors on Monday that a large part of the available cash flows generated by traditional television activity over the years has been used to build the streaming platform.
But while the money of the traditional company supported streaming, the content has not translated for the Max platform, which is renowned, once again, at HBO Max. In May, when the company announced the name change, he also added that the streaming platform would focus more on the quality of the quantity.
During the call on Monday, Zaslav said that sports had not been “a real driver” for the streaming platform.
Move
During the call on Monday, WBD leaders stressed that each company would be “free and clear from the point of view of transactions”. Although the split is free of tax, the leaders would be willing to give up this advantage to conclude the right deal, according to a person close to the question which was not authorized to speak publicly about potential mergers and acquisitions.
Zaslav called for deregulation in pressure for more consolidation in the media industry, which, according to him, is going through a period of “generational disturbance”.
The separation by nbcuniversal of its cable networks is supposed to give it an additional option to invest in its activities and also merge with other networks, previously reported CNBC. The CEO of slope, Mark Lazarus, told CNBC that the SPun-out company was aimed at being acquired.
The current discovery of Warner Bros. is itself a product of consolidation. Warner Media and Discovery merged in 2022, bringing together the Warner Media portfolio from HBO, TNT Sports and other television networks, and cinema, with the discovery television networks group.
Since then, the company has been working to lighten the debt burden resulting from this merger.
Although the company has reimbursed $ 19 billion in debt, it still had a little less than $ 34 billion in net debt at the end of the first quarter, Wiedenfels said on Monday.
Last month, S&P Global Ratings reduced WBD credit score to unwanted status, citing the “cash drops and cash flows” in the traditional television sector.
This debt burden will be divided between the two companies separated once the split, said the company.
“It is sure to suppose that the majority of the debt will live with the global networks and a smaller part, but not also an insignificant part on streaming and studios,” said Wiedenfels.
The two companies should have a strong liquidity, in particular the global activity of networks, which should generate significant available cash flows which will be used to reimburse the debt more.
Disclosure: Comcast is the parent company of CNBC. Square would be the parent company of CNBC as part of the proposed cable spin-out.
– Jacob PRAMUK from CNBC and Sara Salinas contributed to this report.