The Albanian Army > WarnerBros. Discovery

Three big questions re: WarnerBros. Discovery:
1) Why is WarnerBros. Discovery splitting up?
2) How will the split work?
3) What share of total TV time does WarnerBros. Discovery account for?

Setting the table: After three years, WarnerBros. Discovery is breaking into two companies.

Why is WarnerBros. Discovery splitting up?

A few reasons why WarnerBros. Discovery is splitting up:
1) This was a bad idea
2) The stock dropped 60%
3) The deal added $50B in debt

Quote from Scott Galloway - Professor @ NYU Stern School of Business:
“When a company has a profitable but declining business (cable) and a growth business (streaming), investors don’t know who they’re waking up next to — Jekyll or Hyde. Because they don’t know how to value the asset, they assign the multiple of the worst business to the entire company. The divestiture of assets in different life cycle stages provides greater investor clarity and ultimately creates a smaller whole greater than the sum of its parts. Last year, Comcast went good bank/bad bank, spinning its linear assets into a legacy portfolio called Versant, while consolidating the studio, theme parks, NBC, Bravo, and Peacock into a growth company. This week, Warner Bros. Discovery followed suit, announcing it would spin off its linear assets into a new company called Global Networks.”

Quote from David Zaslav - CEO @ WarnerBros. Discovery:
“Together, this combination makes us the best media company in the world.”

Flashback: Will HBO + Discovery = Success?

Bottom line: Cord cutting is vaporizing the most profitable part of this business (cable TV).

Pay-TV subscriptions:
1) 2022 - 76.0M
2) 2024 - 66.4M (↓ 13%)

Flashback: Cord Cutting Gains Steam in 2024

Mr. Screen’s Take: HBO should be a leader in streaming, but its leadership ignored the threat Netflix posed.

Quote from Jeff Bewkes - Former CEO @ Time Warner:
“It’s a little bit like, is the Albanian army going to take over the world?”

A word from our sponsor: In my book, Screen Wars: Win the Battle for Attention with Convergent TV, I wrote an entire chapter titled “The Albanian Army Takes Over The World.”

How will the split work?

Quick answer: One company = cable networks + sports + Discovery+. Another = HBO + movie studios

Quote from Peter Kafka - Chief Correspondent covering media and technology @ Business Insider:
“So splitting the cable channels off from the main company is supposed to create value. Instead of one big company weighed down by a declining asset, you'll have two companies: a "goodco" and a "badco."

What share of total TV time does WarnerBros. Discovery account for?

Quick answer: Just 1.5%. And that number hasn’t grown since the merger.

Quote from Entertainment Strategy Guy:
“Imagine a world where, instead of sitting at about 1.2% of usage in America, HBO/Max had gotten to 3.6% share of living room TV. In that world, we’re probably definitely not having a conversation about WBD splitting itself up.”