Warner Bros. Discovery to split up into two public companies until next year
Warner Bros. Discovery The media giant plans to dividing itself into two public companies by next year, the media giant, on Monday, to switch from the cable to streaming as a consumer.
WBD will divided into a streaming and studios companies that includes its film characteristics and streaming service HBO Max and a global network company that includes CNN, TNT Sports and Discovery.
CEO David Zaslav will lead the Streaming and Studios company. The current CFO Gunnar Wiedenfels becomes CEO of the Global Networks Business.
Warner Bros. Discovery expected to complete the separation by mid -2026.
“By acting two different and optimized companies in the future, we enable these iconic brands with the sharper focus and the strategic flexibility you need to compete most effectively in today's developing media landscape,” said Zaslav in one publication.
The news confirms earlier reporting from CNBC and others that WBD has considered such a split. In December, the company announced a restructuring, which many viewed as a forerunner in full break.
Warner Bros. Discovery's shares rose by around 8%on Monday in mid-day trading.
Cut cable
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Warner Bros. Discovery joins the COMCAST cable giant to separate its traditional Pay TV networks from his wider media business.
Comcast'S NBCUniversal is currently in the process of transforming its portfolio of cable networks, including CNBC, into a new listed company called Rätsant. Among other things, NBCUniversal will continue to monitor streaming service Peacock, NBCS Broadcast Network and The Film Business.
WBD has the largest portfolio of cable TV networks, which was born from the fusion 2022 between Warner Bros. and Discovery, which brought channels such as CNN, TBS and TNT with Discovery, TLC and HGTV.
The movements of Warner Bros. Discovery and ComCast come because the industry competes with the loss of customers from the traditional Pay TV bundle in favor of streaming.
An important focus was on building streaming platforms and in particular to achieve profitability.
The traditional PAY TV drag on the wider media business was presented last year when WBD was written over $ 9.1 billion in its TV network business. The company said that the move had been triggered by re -evaluating the book value of the TV network segment.
Nevertheless, the traditional television channels remain profitable and generate high amounts of money. On traditional television, live sports will still have the largest live audience with it, which makes sport essential for the portfolio of most media companies.
On Monday, Wiedenfels noticed when calling the investors that a large part of the free cash flow from the traditional television business was used over the years to build the streaming platform.
But while the money has supported streaming business, the content has not translated for the Max platform, which in turn is renamed HBO Max. In May, when the company announced the change of name, it also added that the streaming platform would focus more on the quality of the quantity.
During the call on Monday, Zaslav said that sports was not a “real driver” for the streaming platform.
Make movements
On the call on Monday, the WBD managers emphasized that every company would be “free and clear from the perspective of the transaction”. While the split is tax -free, the managers would be willing to do without them in order to complete the right business, according to a person who was not authorized to talk about potential M&A.
Zaslav called for the deregulation in an advance after more consolidation in the media industry, which he said that it was going through a time of the “generation disorder”.
The separation of his cable networks by NBCuniversal should give him another option to invest in his business and also merge with other networks, CNBC previously reported. The CEO of Versant, Mark Lazarus, announced CNBC that the spun-out company should be exhausting.
The current discovery of Warner Bros. is itself a product of consolidation. Warner Media and Discovery merged in 2022 and, the portfolio of Warner Media from HBO, TNT Sports and other TV networks and the film business with Discovery Group from PAY -TV networks, spreads together.
Since then, the company has worked to make the debt burden easier from this merger.
While the company repaid debts of $ 19 billion, it still has net debt at the end of the first quarter of just under 34 billion US dollars, said Wiedenfels on Monday.
Last month, the S&P Global Ratings lowered WBD's creditworthiness credit on the junk status, citing the “continued sales and cash flow declines” in the traditional television business.
This debt burden is divided into the two separate companies as soon as the separation has been completed, the company said.
“It can be assumed that the majority of the debts with global networks and a smaller part, but also not insignificant part, will live on streaming and studios,” said Wiedenfels.
Both companies are expected to have strong liquidity, in particular the global network business, which will generate a significant free cash flow that is used to further repay the debts.
Disclosure: Comcast is the parent company of CNBC. The parent company of CNBC under the proposed cable spinout would be Versant.
– Jacob Pramuk and Sara Salinas from CNBC contributed to this report.
