Warner Bros. Discovery is reorganizing its corporate structure, announcing Thursday that it’s splitting the company’s linear networks and streaming and studio businesses into two distinct operating divisions.
With the new structure, one of the two units under WBD parent will include Global Linear Networks, which among assets count channels Discovery, CNN, HGTV, TNT Sports, Food Network, TLC, TruTV, TBS and others. The second unit is Streaming & Studios, which involves DTC streaming business of Max and Discovery+, as well as Warner Bros. film and entertainment studios. *Update: Variety reports sources as saying the premium cable network HBO is set to be included in streaming and studio assets because it's so closely tied to the Max service.
As media companies try to figure out what to do next with their linear networks business that historically have generated big bucks but continue to decline amid broader pay TV struggles, WBD’s move falls short of Comcast’s recent decision to officially spin out its declining cable networks business into a standalone entity. But it could signal preparation for a sale or combination with others – namely the Comcast SpinCo - as the release noted the move to separate linear networks and steaming will “increase optionality” to pursue value creation opportunities – possibly meaning M&A, although the company itself has not said so directly.
A source familiar with the situation told StreamTV Insider that the company is not planning any immediate leadership changes, nor job cuts as a result of the restructuring. The announcement did say WBD expects “to continue to evolve the Board to execute its strategy.”
Starting steps immediately, the company expects to complete implementation of the new structure by mid-2025. AT&T’s WarnerMedia and Discovery Inc. closed their merger in April 2022 to create what is now Warner Bros Discovery. In Q2 2024 WBD took a $9.1 billion write-down on its linear TV networks, reflecting an acknowledgment of a stark change in value for its linear business that continues to shrink amid wider pay TV industry declines. With the corporate structure change, the company is aiming to enhance strategic flexibility and “create potential opportunities to unlock additional shareholder value.”
According to the press release, the new global linear networks unit is meant to focus on maximizing profitability and free cash flow to continue deleveraging, while streaming and studios will target driving growth and returns on increasing invested capital.
“We continue to prioritize ensuring our Global Linear Networks business is well positioned to continue to drive free cash flow, while our Streaming & Studios business focuses on driving growth by telling the world’s most compelling stories,” said WBD CEO David Zaslav in a statement. “Our new corporate structure better aligns our organization and enhances our flexibility with potential future strategic opportunities across an evolving media landscape, help us build on our momentum and create opportunities as we evaluate all avenues to deliver significant shareholder value.”
But media expert Evan Shapiro sees the move as getting ready to align WBD’s linear networks with that of Comcast’s SpinCo assets. Although it’s not one he views positively.
Commenting about the news on LinkedIn, Shapiro said that while splitting the assets into two divisions may seem like a good idea, it’s not when taking content for the Max streaming service into account.
“Max is entirely powered by content from its channels and studio. Max’s only real hope for global expansion is directly tied to WBD’s international legacy channel business. Even recent Disco Bros deals with Comcast and Charter Communications depend on the combined leverage of channels like HGTV and Max’s streaming subs,” wrote Shapiro.
WBD in Q3 added 7.2 million streaming subscribers globally, it’s largest quarterly DTC gains since launching Max in 2023. However, the lion’s share came from international markets amid Max’s continued global rollout, with just 200,000 being added in its more mature domestic US/CAN market. As of Q3 WBD had a total domestic DTC subscriber base of 52.6 million and global DTC base of 110.5 million. WBD also marked quarterly revenue growth and improved profitability in the DTC segment in Q3.
But as Shapiro mentioned, both streaming and linear assets have been part of the picture for recent carriage renewals with the two largest U.S. pay TV operators. Both Charter and Comcast reached early renewals with WBD, which in addition to continued carriage of linear networks by the cable operators, gives the providers the opportunity to bundle ad-supported versions of WBD’s Max and Discovery+ in their respective pay TV packages.
But now it’s splitting the assets, Shapiro’s post continued, “all in hopes of merging WBD’s lonely island of misfit Pay TV networks with Comcast’s – which would obviously and inevitably melt the combined asset value as badly as they did to Disco Bros.”
Article updated with information about HBO asset.