Warner Bros. Discovery to Split into Two Distinct Companies

In a strategic move to navigate the evolving media landscape, Warner Bros. Discovery (WBD) announced plans to divide its operations into two separate public companies by next year. This decision aims to enhance focus and agility as the industry shifts from traditional cable to streaming services.

The New Structure: Streaming & Studios vs. Global Networks

The restructuring will create two distinct entities:

• Streaming and Studios Company: This division will encompass WBD’s extensive film properties and the HBO Max streaming service. David Zaslav will continue to lead this company.
• Global Networks Company: This segment will include CNN, TNT Sports, and Discovery, among other global networks. Gunnar Wiedenfels, the current CFO, will assume the role of CEO for this business.

WBD anticipates finalizing the split by mid-2026.

Strategic Rationale Behind the Split

According to Zaslav, separating into two optimized companies will empower iconic brands with sharper focus and strategic flexibility, enabling them to compete more effectively in the dynamic media environment. This move follows earlier reports and restructuring efforts within WBD, signaling a proactive approach to industry challenges.

Industry-Wide Trend: Adapting to Streaming

Warner Bros. Discovery is not alone in this strategic shift. Comcast’s NBCUniversal is also in the process of spinning out its cable networks into a new publicly traded company called Versant. These actions reflect the industry’s response to declining traditional pay-TV subscriptions and the growing importance of streaming platforms.

The focus is now on building profitable streaming services. WBD’s Max platform, formerly HBO Max, will prioritize quality content over quantity. Executives acknowledge that live sports, a key driver for traditional TV, has not yet had the same impact on their streaming service.

Financial Implications and Future Moves

The split is expected to be tax-free, though executives remain open to alternative deal structures if beneficial. Zaslav has advocated for deregulation to encourage further consolidation within the media sector.

WBD, formed by the 2022 merger of Warner Media and Discovery, has been working to reduce its debt. While the company has repaid $19 billion, it still held significant debt at the end of the first quarter. This debt will be divided between the two new companies, with the global networks business expected to generate strong cash flow for debt repayment.

The strategic separation aims to position both companies for success in a rapidly changing media landscape, emphasizing focused growth and financial stability.

Disclosure: Comcast is the parent company of CNBC. Versant would be the parent company of CNBC under the proposed cable spinout.