Warner Bros. Discovery said it would split into two publicly traded companies, separating its studios and streaming business from its fading cable television networks as the parent company of HBO and CNN looks to improve competition in the streaming era.
The breakup is the latest unravelling of decades of media consolidation that created global conglomerates spanning content creation, distribution and in some cases, telecommunications. It unwinds WarnerMedia and Discovery’s prior merger in 2022, aiming to grow the streaming and studios business without the declining networks unit weighing them down.
The new streaming-and-studios company will include Warner Bros., DC Studios and HBO Max — the crown jewels of Warner Bros. Discovery’s entertainment library.
The networks unit, which will hold up to a 20 per cent stake in its counterpart, will house CNN, TNT Sports and Bleacher Report.
CEO David Zaslav will lead the streaming and studios unit, while CFO Gunnar Wiedenfels will head the networks unit. The separation will be structured as a tax-free transaction and is expected to be completed by mid-2026.
“We’ve continued to analyze how our industry is evolving,” Zaslav told investors. “The right path forward became increasingly clear … to separate global networks and streaming and studios into two independent, publicly traded companies.”
Most of the company’s debt would be held by the global networks company. Warner Bros. Discovery had gross debt of $38 billion US as of March. The company said it secured a $17.5 billion US bridge loan from J.P. Morgan that it would use to restructure its debt.
Shares were down almost three per cent at midday, after rising by as much as 13 per cent in the hours after the announcement.
Stock down since merger
Warner Bros. Discovery’s stock remains down nearly 60 per cent since the merger, hurt by cable subscriber loss, tough streaming competition and investor concerns over the debt-laden company’s direction.
Brian Wieser, CEO of Madison and Wall, an advisory firm for media, technology and other companies, said the split will not fix underlying weakness at Warner Bros. Discovery.
If anything, Wieser said, it “could make them worse off by favouring financial engineering over focusing on improving existing operations or pursuing new opportunities for growth … a deal like this can hamstring both sides of the company until the transactions are closed.”
Media executives had initially anticipated a wave of consolidation under U.S. President Donald Trump’s administration, though that has not come to pass.
“For a series of reasons, that proved harder than anyone thought,” said Jonathan Miller, a veteran media executive who now serves as chief executive of Integrated Media. “It looks like the characteristic of this year will be how do we get our house in order, and do what we can that’s under our control.”
Comcast is spinning off most of its NBCUniversal cable networks portfolio into a separate company, Versant. Lions Gate Entertainment completed the separation of its Starz cable network from its film and television studio in May.
Such breaking up of media conglomerates could set the stage for further deal-making, said one veteran media executive who spoke on condition of anonymity.
Last week, about 59 per cent of Warner Bros. Discovery shareholders at the annual meeting voted against executive pay packages, including Zaslav’s $51.9 million US 2024 compensation, in an advisory vote that signaled dissatisfaction.
Like other entertainment companies, Warner Bros. Discovery is struggling with declining ratings and revenue at its cable networks. Consumers have been dropping pay-television subscriptions in favour of streaming services.
