We’ve heard these phrases before: “unlock value,” “maximize potential,” “leverage strengths.” All three were used in Warner Bros. Discovery‘s corporate press release on Monday morning announcing that the David Zaslav-led company will now look to become two separate companies, one housing the film studio, HBO, and streamer, and the other housing all of Discovery’s old cable channels.
We had a feeling this would happen sooner or later. Cable — or linear TV — is dwindling, even if it still brings in cash. And when Comcast did its own spin of cable channels with a company now called Versant (“SpinCo” had a nice ring to it), we wrote that it’s a new shortcut for a constantly consolidating Hollywood to unburden the “good stuff” from the “bad stuff.”
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But to many it probably sounds like “unlocking value” translates to “make more money for shareholders.” Yeah, there’s certainly that. But the idea is that once the two different facets of the business are free from each other, one might be able to merge with or acquire something else, it could mean selling an asset, or it could be the difference in keeping a network afloat.
The deal for the spin won’t close until mid-2026, and WBD CFO Gunnar Wiedenfels will be the new CEO of the spun-off company. So while this might not mean much in the shortest of terms, long term it provides some opportunity that wasn’t possible at Warner Bros. Discovery as the company was currently constructed. The vision was certainly loftier when Warner Bros. merged with Discovery just three years ago, so it’s easy to see this as Zaslav waving the white flag on cable channels he once considered his calling card.
We’ll start on the studio side of things. The “Streaming & Studios” company will be made up of Warner Bros. Television, Warner Bros. Motion Picture Group, DC Studios, HBO and HBO Max (including its international sports offering), Warner Bros. Games, Tours, Retail and Experiences, as well as studio production facilities in Burbank and Leavesden.
This is the growing part of the company, with HBO Max recently profitable, DC Studios burgeoning with the impending release of “Superman,” Warner Bros. Games looking to find another hit like “Hogwarts Legacy,” and WB, WBTV, and HBO continually pumping out hits. But as Zaslav said in a morning investors call, it’s also the more volatile and unpredictable of the two.
“I think the thing that I feel best about is we put real discipline around it, but our overall content is underused — our great iconic content — rather than overused,” Zaslav said. “So we’ll be going more and more to the best content that we have, that people see and love all around the world, whether that’s Lord of the Rings or DC. [WBD film chiefs Mike DeLuca and Pam Abdy] are really looking at mining the big brands. We’re still going to do a lot of original, but mining those big brands that give us a real advantage in the marketplace.”
Warner Bros. Discovery has roughly $37 billion in gross debt (a number it has whittled down through content much loathed content write-offs and layoffs), and a big chunk of that is going to be sticking with the other company, not with the studios. So for one you would hope another “Batgirl” or “Coyote vs. Acme” debacle is a thing of the past. Could it also mean a little more content spend down the road, or more hands on attention from Zaslav in improving HBO Max?
It would also make it a whole lot easier for Zaslav to sell the whole thing to a company like Apple or sell off individual parts to other buyers who can do more with it than WBD can. The gaming division is one some analysts have previously eyed as something that could be on the move. The film studio and its 100+ year library of movies is also dang valuable, now even more so since it’s not saddled with dying cable networks and a mountain of debt, but that’s less likely since it’s the “crown jewel” of the whole .
Much of the same could be said of the “Global Networks” that will form the new company, which includes TNT, TBS, CNN, Discovery channels such as HGTV and Food Network, the streaming service Discovery+, the sports brand Bleacher Report, and the eventual latest iteration of CNN’s streaming plan. The spun company is also getting WBD’s domestic sports rights, so that gives it a bit more firepower when negotiating future carriage deals.
It too could look to sell some assets from that portfolio. Does CNN fit in with that larger picture, or can someone else do more with it? How valuable is TNT without the NBA moving forward? The other option could be a merger. A spun-off mix of WBD’s cable assets could marry quite well with everything Comcast spun off, and becoming a juggernaut of linear cable networks could be the only path forward for the medium. In December, we even speculated that Fox could be a good partner since what WBD has always lacked is a broadcast channel.
All of this is still a risk. Last July, Lightshed analyst Rich Greenfield suggested divorcing cable from the studios and streaming would be “irresponsible,” as it needs the cash flow from cable to help grow the streaming business.
It’s also a last resort. The combination of all these assets back in 2022 was meant to make it compete with Disney and Netflix, not tank its stock price over three years. Whatever the future, the goal posts for “maximizing potential” have shifted.
