Move aims to sharpen focus and reduce debt as legacy media adjusts to cord-cutting era
Warner Bros. Discovery (NASDAQ: WBD) has announced plans to split into two independent, publicly listed companies by mid-2026, separating its struggling linear TV assets from its streaming and studio operations in a bid to better navigate an evolving media landscape.
Under the plan, WBD’s flagship content brands—HBO, HBO Max, Warner Bros. Television and Motion Picture Group, DC Studios, and Warner Bros. Games—will form a new “Streaming and Studios” company, to be led by current CEO David Zaslav. Meanwhile, its traditional cable and global TV networks—including CNN, TNT Sports, Discovery, Discovery+, Bleacher Report, and free-to-air channels across Europe—will be housed under a second entity, tentatively named “Global Networks,” to be helmed by current CFO Gunnar Wiedenfels.
The separation comes just three years after the US$43bn merger of WarnerMedia and Discovery Inc., a deal originally pitched as creating a vertically integrated media powerhouse. But continued losses in the pay-TV segment and heavy post-merger debt—still hovering just below US$34bn—have prompted a strategic rethink. WBD said the split will allow each business to pursue targeted strategies, reduce debt, and unlock shareholder value.
“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,” said Zaslav in a statement.
While Zaslav will lead the streaming and studios business, the Global Networks entity will retain up to a 20% stake in the spinoff—intended to be monetised in a tax-efficient way to reduce debt.
Debt pressure and declining cable revenues
Despite repaying US$19bn since the 2022 merger, WBD’s financial health remains under scrutiny. In May, S&P downgraded the company’s credit rating to junk, citing ongoing cash flow declines in its legacy TV networks. The majority of debt post-split is expected to sit with the Global Networks unit.
Still, the company emphasised that both new entities will retain strong liquidity. Global Networks, in particular, is expected to generate significant free cash flow through profitable legacy TV assets and live sports broadcasting.
On a call with investors, Wiedenfels acknowledged the structural headwinds in cable, but noted that the linear business had funded WBD’s streaming expansion and remained “highly cash generative.”
Shares fall despite early optimism
WBD shares initially jumped as much as 12% following the announcement, but closed the day down 2.95% at US$9.53, as investors digested the long timeline and complexity of the separation.
Analysts noted the move echoes broader industry trends. Comcast is currently spinning off its cable networks into a separate company called Versant, and Paramount Global is pursuing a merger with Skydance Media while weighing the future of its linear assets. Disney, too, has explored offloading networks like ABC and FX.
“This won’t be the last,” said Emarketer’s Paul Verna. “The diverging fortunes of streaming and traditional pay TV have been unmistakable for years.”
An uneasy legacy
Some observers noted the irony of the move, which unravels much of the consolidation logic that brought WarnerMedia and Discovery together in the first place. “Nowhere in the announcement of the merger did any of the principals acknowledge the attrition of the linear TV business, which was painfully evident at the time,” Verna added. “This move reveals a company fumbling its way through disruption.”
The split still requires board approval and final structuring, including the allocation of debt, final naming of the entities, and potential changes to corporate governance. WBD also faces ongoing scrutiny, including a recent symbolic shareholder vote rejecting Zaslav’s US$50m+ compensation package.
In the meantime, both executives will remain in their current roles until the separation is finalised.
