Warner Bros Discovery separates streaming from cable TV in two-way split

Warner Bros Discovery said on Monday it would split into two companies, separating its studios and streaming business from its fading cable television networks as the parent of HBO and CNN looks to compete better in the streaming era.

The breakup is the latest sign of the great unraveling of decades of media consolidation that have created global conglomerates spanning content creation, distribution and in some cases, telecommunications.

The strategic reset would provide Warner Bros Discovery’s streaming unit more room to scale by producing hit studio content without being bogged down by the declining cable networks business.

Its CEO David Zaslav will lead the streaming and studios business after the breakup, while CFO Gunnar Wiedenfels will head the global networks unit.

“By operating as two distinct and optimized companies in the future, we are empowering these iconic brands with the sharper focus and strategic flexibility they need to compete most effectively in today’s evolving media landscape,” Zaslav said.

The separation for the company formed out of a merger between WarnerMedia and Discovery in 2022 will be structured as a tax-free transaction and is expected to be completed by mid-2026. WBD shares were up nearly 6% in premarket trading.

The company had laid the groundwork for a possible sale or spin-off of its declining cable TV assets in December by announcing a separation from its streaming and studio operations.

The split will align the company with Comcast, which is spinning off most of its cable TV networks such as MSNBC and CNBC.

Bank of America research analyst Jessica Reif Ehrlich has said Warner Bros Discovery’s cable television assets are a “very logical partner” for Comcast’s new spin-off company.

WBD also said on Monday it launched tender offers to restructure its existing debt, funded by a $17.5 billion bridge facility provided by J.P. Morgan.

The bridge loan is expected to be refinanced ahead of the planned separation, it said, adding that global networks will retain up to a 20% stake in streaming and studios, which it plans to monetize to further reduce debt.

J.P. Morgan and Evercore are advising WBD on the deal, while Kirkland & Ellis is serving as legal counsel.