Warner Bros. Discovery is splitting into two companies

By Brian Stelter, CNN

(CNN) — Warner Bros. Discovery is splitting into two separate publicly traded companies – one oriented around the HBO Max streaming service and Warner Bros. studio, and the other around CNN and other television networks.

The first company, known for now as “Streaming & Studios,” will be led by CEO David Zaslav, and the second company, “Global Networks,” will be led by CFO Gunnar Wiedenfels.

“The separation aims to provide each company with greater strategic flexibility and focus,” the company said in a statement.

Warner Bros. Discovery intends for the corporate breakup to take effect by mid-2026.

Monday’s announcement is Warner Bros. Discovery’s answer to investor pressure and intensive industry-wide change. As the cable television business contracts in the streaming era, Zaslav is offering shareholders a way to invest in the growing HBO Max part of the business without exposure to cable.

That said, the networks that are part of the second company continue to boast strong profits and global audiences.

“This evolution isn’t a departure from our strategy — to deploy Max globally, optimize our global networks and return our Studios to industry leadership — it’s about unlocking the full potential of two strong businesses,” Zaslav told staffers in an internal memo. “Each has a distinct focus, a clear mission, and the scale to succeed on its own terms.”

The breakup comes only three years after the combination of Discovery and the old Time Warner took effect to great fanfare. Shares in Warner Bros. Discovery (WBD) have fallen by about half since then.

On Monday morning the shares rallied more than 10% on the news of the split, but ultimately closed down about 3%.

Monday’s breakup announcement had been expected because Warner Bros. Discovery has spent the last six months restructuring itself with an eye toward a split. Comcast is currently going through its own version, though that one is structured as a spinoff of cable assets rather than a split into two publicly traded companies.

When the 2022 deal took effect WBD carried more than $50 billion in debt. The company has made great strides in reducing the debt load; still, debt was cited as a factor in S&P Global Ratings’ decision to downgrade the company’s stock last month to “junk” status.

The primary reason S&P cited was “continued revenue and cash flow declines at its linear TV operations.”

Most of the remaining $37 billion in debt “is going to live with global networks,” with a “not-insignificant portion” going with the streaming side, Wiedendfels told analysts on a Monday morning call.

Although WBD’s best known streaming brands will be part of “Streaming & Studios,” the networks company will also have some streaming assets of its own, including Discovery+ and Bleacher Report. CNN is also building a new streaming service that will launch later this year.

CNN has been through multiple corporate reconfigurations in recent years. The network’s founder Ted Turner said in a statement Monday that he wishes “all the best” for CNN ahead of the next transition.

“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,” Turner said. “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.”

This story has been updated with additional context and developments.

The-CNN-Wire
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