Setting HBO Up For Success: The WBD Split Story

Warner Bros. Discovery CEO Dave Zaslav announced this morning that the company would be splitting into two separate entities: a “Streaming and Studios” business, to be led by Zaslav himself, and a “Global Networks” business, to be run by CFO Gunnar Wiedenfels.

Streaming and Studios (S&S) gets all the shiny stuff—HBO and HBO Max, Warner Bros. Television, Warner Bros. Motion Picture Group, and DC Studios. The parts of the company that generate headlines and Emmys. The ones that have people using words like “prestige TV” and “cinematic universe.”

Global Networks (GN), on the other hand, gets the linear side of the business—CNN, TNT, TBS, Discovery, HGTV, TNT Sports in the U.S., a slew of free-to-air networks in Europe, and multiple digital products, including Discovery+ and Bleacher Report. Oh, and it also gets the debt. Which is a big part of what’s going on here.

Sort Of A Big Deal, Sort Of Not

This may sound like a major shake-up—and on the surface, sure, it is—but it’s also not quite the tectonic shift the headlines might suggest. Comcast did something very similar just a few months ago, spinning out its streaming and studio assets into a distinct unit separate from its legacy cable and broadband operations. This is part of a larger trend. Everyone wants a growth narrative, and legacy cable—especially the U.S. kind—is not that.

The real reason for these splits? Streaming and cable are now competing for the same ad dollars. Soon, they’ll be fighting for the same distribution deals, too, as MVPDs, who make the bulk of their income from selling broadband, start selling streaming bundles as a “double play” (broadband + TV) option. 

If you’re a company like WBD or Comcast, having both businesses under one roof starts to feel more like a liability than a synergy. You’re pitching your streaming product to Charter or T-Mobile while your cable networks are locked in a carriage dispute with them. That’s awkward.

So the thinking seems to be that splitting them up will let each part of the business focus on its own story. Streaming and Studios gets to tell a high-growth, debt-light tale to Wall Street. Global Networks can run the cable business as efficiently as possible without weighing down the other side. And as that business continues to shrink—slowly, but inevitably—it won’t drag the streaming business down with it.

About That Debt

Global Networks is gifted with the lion’s share of that debt (or most of it, anyway), a legacy of AT&T’s massive fail in running something that wasn’t a phone company. The idea here is to take the assets that are still generating steady revenue but are no longer seen as growth engines (cable networks, broadcast channels, legacy digital platforms) and pair them with the financial baggage. That way, Streaming and Studios looks a lot like the show horse it was intended to be. 

If you’re looking at this and thinking “this feels like a setup for a future deal,” well… yeah. That’s kind of the point. Structurally separating these businesses opens up options. WBD could sell one piece without impacting the other. Or take on investment in one without messing up the balance sheet of the whole company. It gives them options they did not have before, given that the end game seems to be to get the best price for their assets. 

Both Sides Get A Win

It’s worth noting that this isn’t a “winners and losers” situation. Both sides are getting something of value. Streaming and Studios has HBO, which is currently having a bit of a revival thanks to buzzy series like The White Lotus, The Last of Us, and the halo effect of Succession. Given that Netflix has gone all in on mainstream, algorithm-friendly content, HBO is now the clear winner in the “shows the New York Times is buzzing about” sweepstakes, the general perception being that despite all the chaos, the network has not lost its creative chops. That’s not nothing.

On the Global Networks side, CNN may be down in the ratings, but it’s still the most recognized news brand in the world. More importantly, channels like Discovery and HGTV are far more valuable than many observers realize. 

WBD owns the IP on all those shows—House Hunters, Fixer Upper, Property Brothers, Iron Chef—and they’re evergreen. A 2003 episode of House Hunters doesn’t look dated the way a flip-phone centric episode of CSI might. 

What’s more, all those non-fiction shows are cheap to produce and easy to dub into multiple languages, which makes them incredibly valuable as WBD pushes into international markets.

Final Thought

This is actually a clever solution for WBD, a textbook example of playing the hand that’s dealt you, even if that hand is largely due to your missteps.

It doesn’t solve every problem WBD is facing, but it gives them more levers to pull. And in a media landscape where flexibility is everything—because nobody really knows what’s coming next—that’s not a bad place to be.

Streaming isn’t going to rule the world the way network TV once did. And while cable will hang on for the rest of this decade and then some, its days are ultimately numbered. 

Which is why a plan to keep them from getting in each other’s way may prove to be a very prescient solution.

Especially when it comes to selling HBO.