CNN and HBO parent Warner Bros. Discovery to split into two companies

Another, the company is calling Global Networks, will house its traditional cable businesses such as CNN, Discovery and the Atlanta-based Turner properties, along with WBD’s sports rights properties, free-to-air channels across Europe and digital products such as the Discovery+ streaming service and Bleacher Report.

It was not clear Monday what impact the planned spinoff would have on WBD’s Atlanta entities. But the spinoff would leave the former Turner properties with their third owner in the last 10 years.

The spinoff announcement comes just three years after Discovery completed its purchase of WarnerMedia from AT&T, creating a huge company spanning properties like CNN, Discovery, TLC, TNT, TBS, the storied Warner Bros. film and television studios and HBO.

Its intellectual property stretched from Harry Potter to HGTV, DC comics to Food Network. The combined company was designed to fend off streaming upstarts like Netflix and Apple and other giants like Disney in a time of upheaval in consumer tastes, technologies and slumping ad sales.

Days after the deal closed in April 2022, WBD President and CEO David Zaslav told a town hall with employees, “We have the goods. We have the chance to be the greatest media company.”

Credit: AP

Credit: AP

Now, WBD is separating to adapt yet again to a period of generational disruption in the entertainment industry. Streaming is no longer an emerging media; it’s a threat to the traditional cable business. Revenue and viewership has been on the decline for legacy cable networks such as the Turner properties as consumers “cut the cord” in favor of streaming services.

Each company will have its own board and management team, Zaslav said during a press conference announcing the split. Zaslav will be the top executive of the Streaming & Studios business. Gunnar Wiedenfels, chief financial officer of WBD, will become the top leader of the networks business.

“These companies will be better aligned with shareholders based on each business’ individual dynamics and growth prospects,” Zaslav said during the call. “More agile, more aggressive and creative in pursuing growth, and sharper in their ability to deliver consumers more of the stories and entertainment they demand.”

WBD shares were down by nearly 3% at closing bell. They’re down about 60% since the day the merger closed in April 2022.

The separation, which Wiedenfels called a “natural progression for WBD” during the conference call, is expected to be completed in the middle of next year.

Credit: AP

Credit: AP

Warner Bros. Discovery is not the only media company resorting to separation. Comcast is in the process of off-loading much of NBCUniversal’s cable portfolio into a separate, publicly traded company called Versant. These networks include CNBC, MSNBC, E!, USA Network, SYFY, Oxygen and The Golf Channel.

In December, WBD announced it was splitting its business into two divisions, a move that came months after WBD took a $9.1 billion write-down on its own book value to reflect the diminishing value of its networks. A write-down often occurs if assets acquired in a deal do not generate the financial results that were expected of them at the time of purchase.

An official spinoff was not announced at the time of the December announcement. But the move was seen as one that would make divestitures easier to happen. The unit under which its cable properties will be housed was then named Global Linear Networks, and it was unclear at that time if any streaming properties would be operated under it.

An undisclosed though significant sum of WBD’s $37 billion in debt load will exist with the networks company, Wiedenfels said during the conference. A “not-insignificant portion” will remain with the studio and streaming company.

Additionally, Global Networks will retain up to a 20% stake in Streaming & Studios, Wiedenfels said. The retained stake is “designed to enhance [the] deleveraging path” for the networks company.

“The cultural significance of this great company and the impactful stories it has brought to life for more than a century have touched countless people all over the world. It’s a treasured legacy we will proudly continue in this next chapter of our celebrated history,” Zaslav in a press release. “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.”

In a statement, Ted Turner, who founded CNN in Atlanta, expressed his affection for the network.

“While I haven’t been involved with CNN and its operations for more than two decades, I continue to hold deep affection for the company, its leadership, and the dedicated employees and staff. I have the utmost respect for the important work CNN does, and I wish them all the best as they navigate this new chapter following the recent announcement of the planned split.”