Warner Bros. Discovery to separate cable, streaming

After merger 3 years ago, media giant splitting into 2 companies

By Benjamin Mullin and Lauren Hirsch The New York Times

Warner Bros. Discovery, the film and TV colossus behind HBO and CNN, announced Monday that it would cleave itself into two companies, separating its cable networks and streaming businesses.

David Zaslav, the CEO of Warner Bros. Discovery, will lead the company’s streaming and studios business, which will include the streaming service HBO Max and Warner Bros. Motion Picture Group. The cable business, which will include CNN, will be run by Gunnar Wiedenfels, the chief financial officer of Warner Bros. Discovery.

Warner Bros. Discovery said it expects the transaction to be completed by the middle of next year. Shares of the company increased roughly 10% on news of the separation.

U.S. media giants have been looking to jettison their declining cable networks while preserving their faster-growing streaming services. Comcast, the parent company of NBC and Universal Studios, said last year that it would separate its traditional TV business into a new company called Versant.

Since it was created three years ago, Warner Bros. Discovery has struggled to convince shareholders that it has a winning combination with lighter fare, such as “90 Day Fiancé,” and prestige hits, such as “The White Lotus,” on its traditional networks and streaming services.

The company has lost roughly half its value since it was forged through the fusion of reality-TV company Discovery and the vestiges of Time Warner.

It has also been affected by the branding confusion surrounding its flagship streaming service, christening it HBO Max, then dropping “HBO” before announcing plans to readd it again last month.

The decision to split represents a major about-face from the conventional wisdom at the time of the deal — that media companies needed to get bigger to compete with streaming giants like Netflix.

Following that logic, Disney acquired 21st Century Fox, AT&T bought Time Warner, and Discovery merged with WarnerMedia.

As Warner Bros. Discovery has faced pressure from shareholders, the company brought on several new directors to its corporate board, including Anthony Noto, a former Goldman Sachs banker who served as CEO of SoFi; Joey Levin, the former CEO of IAC; and Anton Levy, the former co-president of the private equity firm General Atlantic. John Malone, the cable mogul who mentored Zaslav, has stepped back from the board.

In addition to CNN, the cable networks group will include TNT, TCM, Discovery; free-to-air channels in Europe; and TV rights to U.S. sporting events, including the National Hockey League and the March Madness NCAA basketball tournament.

The streaming business will include Warner Bros. Television, DC Studios and HBO, as well as the company’s film and TV libraries.

In its release, Warner Bros. Discovery said the split would allow shareholders to assess the value of each business independently and let executives cater more closely to each company’s needs.