Warner Bros. Discovery Drops Linear Ballast to Float HBO Max
Having trailed the move a year ago, Warner Bros Discovery (WBD) chief David Zaslav has followed through on plans to split the company in half. 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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