Warner Bros. Discovery restructures as cable struggles, setting stage for deals
Warner Bros. Discovery announced a major restructuring Thursday, a preliminary step that could lead to the breakup of the battered media company.
Investors cheered the news that the company was separating its linear networks — including CNN, TBS, Food Network, Cartoon Network and HGTV — into a distinct unit within the company. The move comes after Warner Bros. Discovery took a $9-billion write-down in August to reflect the diminishing value of its basic cable channels.
The other half of the enterprise will be dedicated to producing movies and award-winning television shows and its newer direct-to-consumer businesses. This unit — called Studios & Streaming — will be comprised of the Burbank-based Warner Bros. movie and television studios, premium channel HBO and the Max streaming platform.
The move comes less than a month after Comcast announced that it would spin off its linear cable channels, including MSNBC, CNBC and USA Network, into a separate publicly traded company. Warner Bros. Discovery isn’t going that far — at least not yet — because it still heavily depends on the revenue that it receives from distribution fees for its cable channels.
Analysts point to the David Zaslav-led company’s expected loss of the NBA contract and underperformance in key business units during the last two years.
However, in a statement, the company acknowledged that the structure was designed for the company to be more flexible “to pursue further value creation opportunities for both divisions in an evolving media landscape.”
Both divisions will report up to David Zaslav, the company’s chief executive since his smaller Discovery programming firm combined with WarnerMedia in 2022.
“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,” Zaslav said in a statement.
Warner Bros. Discovery reaches an agreement for Comcast Corp. to continue carrying its cable channels, including HBO, TNT, CNN and Animal Planet.
Warner Bros. Discovery stock, which has been gaining ground in recent weeks after falling to a low of about $6 a share earlier this year, jumped 15% on the news. In mid-morning trading, shares were trading at about $12.20.
Warner Bros. Discovery said in the statement that it expects “the new corporate structure to enhance clarity and focus, with each division positioned to deliver on its specific strategic and operational objectives.”
“They can’t go on like this,” Bank of America analyst Jessica Reif Ehrlich said, referring to the lagging stock and string of missteps by Warner Bros. Discovery boss David Zaslav.
The streaming and studios unit “will focus on driving growth and strong returns on increasing invested capital,” the company said.
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