Warner Brothers Discovery Plan to divide into two public companies by next year, media giants announced on Monday, in the industry as the latest upheaval in the form of streaming from consumer cable.
WBD will separate in a streaming and studio company, which will include its movie property and streaming service HBO Max and a global network company, including CNN, TNT Sports and Discovery in other businesses.
CEO David will lead the Jaslavic streaming and studio company. Current CFO Gunner Widenfels Global Network will become the CEO of business.
Warner Bros. Discovery is expected to complete the division by mid -2026.
Jaslav said, “By working as two separate and customized companies in the future, we are strengthening these reputed brands with sharp focus and strategic flexibility. release,
Prior to the news, reporting by CNBC and others has been confirmed that WBD was considering such a division. In December, company Announced reorganization Many people saw as a precursor for a complete break.
Warner Brothers Discovery shares were more than 2% in the afternoon trading on Monday.
Cutting cable
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Warner Bros. Discovery joined the cable giant Comcast in separating his traditional pay-TV network from his broad media business.
ComcastCurrently in the process of nbcuniversal Spinning your portfolio of cable networksIn a new public trading company, including CNBC Is calledNBCUNIVERSAL will continue to oversee streaming service peacock, NBC’s broadcast network and film business among other assets.
The WBD has the largest portfolio of the cable TV network, born from the 2022 merger between Warner Brothers and Discovery, which brought together channels such as CNN, TBS and TNT with search, TLC and HGTV.
Warner Bros. Discovery and Comcast’s moves come as the industry is struggling with the loss of customers with traditional pay-TV bundles in favor of streaming.
A significant focus has been focused on manufacturing streaming platforms and reaching especially profitability.
Traditional Pay-TV drag on comprehensive media business was shown last year when WBD Informed Right-down of $ 9.1 billion on your TV network business. The company said the move was triggered by revaluation of the book value of the TV network segment.
Nevertheless, traditional TV networks remain beneficial and produce huge amounts of cash. Live sports broadcast on traditional TVs still bring to the largest live audience, making sports for the portfolio of most media companies necessary.
Widenafales mentioned on a call with investors on Monday that the free cash flow generated from traditional TV business over the years has been used to manufacture streaming platforms.
But when cash from traditional business has promoted streaming, the material has not translated to the Max platform, which is being renamed, again, to HBO Max. In May, when the company announced the name change, it also stated that the streaming platform would focus more on quality than quantity.
During Monday’s call, Zaslav said that there was no “real driver” for sports streaming platforms.
Tricks
On Monday’s call, WBD officials insisted that each company would “be independent and clear from the transaction’s approach”. While the partition is tax-free, the authorities will be ready to abandon the advantage to make the right deal that was publicly not authorized to speak about the potential M&A.
Zaslav has called for a deragulation in a push for more consolidation in the media industry, which he has said that the “generational disruption” is undergoing a period.
The separation of NBCUNIVERSAL’s own cable network means to invest it in your business and give optionality and also merge with other networks, CNBC has previously stated. Versent CEO Mark Lazarus has told CNBC that the spoon-out company aims to acquire.
The current Warner Bros. Discovery is a product of consolidation in itself. Warner Media and Discovery merged in 2022, bringing HBO, TNT sports and other TV networks to the media’s portfolio and film business, Discovery’s group of Discovery’s Group of Pay-TV networks.
Ever since, the company has been working to lighten the loan load arising from that merger.
While the company has repaid a loan of $ 19 billion, still at the end of the first quarter it was below $ 34 billion in pure debt, Widenfels said on Monday’s call.
S&P global rating last month Cutting In the traditional TV business, citing “continuous revenue and cash flow”, WBD’s credit rating in junk.
The company said that after the completion of the partition, load loads would be divided between two separate companies.
“It is safe to assume that most loans are going to live with global networks and a small portion, but not even insignificant parts on streaming and studios,” Widenfels said.
Both companies are expected to have strong liquidity, especially the global network business, which is estimated to generate significant free cash flows that will be used to pursue the loan.
Disclosure: Comcast is the original company of CNBC. Versent will be the original company of CNBC under the proposed cable spinout.
– Jacob Prauk and Sara Salinas of CNBC contributed to this report.
