Streaming Media
Having trailed the move a year ago, Warner Bros Discovery (WBD) chief David Zaslaf has followed through on plans to split the company in half.
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The company is to separate
into Streaming & Studios and Global Networks by mid-2026 effectively
undoing the $43 billion merger between WarnerMedia and Discovery in 2022.
In doing so, WBD is pursuing the same course as Comcast
which also spun off its cable business into a new division (called Versant) to
remove the anchor from what both companies see as the more buoyant streaming
future. For WBD this is centered around HBO Max, which is now in 77 markets,
while Comcast is betting on Peacock. Last month, Lionsgate completed the
separation of its cable and streaming channel, Starz into a new company.
Matt Trickett, Head of Media, Ampere Analysis says, “We have
seen several of the US Studios hone in on what they think is core and non-core
to their business moving forwards and the conclusion is that growth in their
streaming businesses, buttressed by a strong slate of premium content from
their various studio production entities - namely TV series and movies - is the
central strategy. This split will give the Management of the Streaming
and Studios business a core focus to optimise HBO Max in current markets, push
on with roll outs and partnerships in markets where it is not yet present and
bring more alignment to production for its streaming business.”
The linear TV division will retain up to a 20% stake in
Streaming & Studios to “enhance the deleveraging path for Global Networks”,
according to WBD. It includes CNN, HBO, TNT, Discovery Channel, as well as
Eurosport and TNT Sports in the UK, and currently reaches 1.1 billion viewers
across 200 countries and territories but will assume most of WBD’s debt that
runs into the tens of billions of dollars.
The main revenue driver at Streaming & Studios will be
streaming. “Investing in HBO’s world-class programming which differentiates and
drives the platform, and prioritizing the operating principles that have put
the Studios on a path back to their target of at least $3 billion in annual
adjusted EBITDA,” explained a WBD release.
In an analyst call Zaslav who will head up the streaming
services went further. He called the motion picture business “probably the
smallest part… it’s very hit-driven.”
“The secret sauce for us is the highest quality content and
library, together with local content, together with local sports,” he added. “That
will be our global recipe.”
Peter Jankovskis, an analyst at Arbor Financial Services,
said the split would help investors get a better understanding of each new
company's value.
“When you make the business less complicated, analysts can
go in and do a better job of determining what the business is actually
worth," he told the BBC. “It's a very competitive market right now, so
many firms are trying to segregate out the streaming portion or the content
portion of their businesses so that the remaining business can be valued
separately.”
Sports rights question
U.S. sports rights including NCAA March Madness, the French
Open, NASCAR, Major League Baseball and the NHL will reside at Global Networks,
and its management team led by current WBD CFO Gunnar Wiedenfels will determine
how best to monetize the streaming and digital rights
"Internationally, sports will largely coexist, both on
linear and streaming, as they do today," Wiedenfels said.
The Global Networks division becomes a potential acquisition
target with a merger between it and Versant one possible option. Mark Lazarus, Versant's CEO, told CNBC Sport last month he was interested in
bidding on sports rights to gain distribution heft with pay-TV operators.
Acquiring TNT Sports could be a major step in that direction.
Noting that at the point of split, slated for mid-2026,
WBD’s Global Networks will still be tied to the Studio and Streaming business
through a 20% retained stake (although that is expected to reduce over time), Ampere
expects this also means content supply between the two divisions will, to a
degree, remain intact.
“It is important that the current HBO Max proposition is not
significantly diluted by a reduced supply of content as it builds momentum,”
says Trickett. “It may also give the Global Networks division more flexibility
to choose how its content is utilised moving forwards.”
In the UK, the pathway has already been cleared to a degree
with structural changes taking place earlier this year – the Eurosport channels
previously available on Discovery+ have been closed and this content now sits
with the premium TNT sports service.
“WBD is in the process of buying out the remaining 50% share
of the TNT JV from BT,” notes Trickett. “The question in the medium term is how
much of a strategic driver WBD thinks a premium sports service is in the UK and
in what way some form of integration with HBO Max could help drive uptake of
the overall services, as HBO Max goes DTC in this market.”
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