On Monday, three years after WarnerMedia was spun off from AT&T and merged with Discovery to form Warner Bros. Discovery, the company announced that it was splitting back apart. WBD will split into a “Streaming and Studios” company consisting of the various studios, mostly Warner Bros-branded but also including DC Studios, as well as HBO and the streaming service about to be re-renamed back to HBO Max, and a “Global Networks” company with all of the current WBD’s non-HBO linear networks as well as the discovery+ streaming service.
This comes on the heels of Comcast announcing its plans to split off most of its linear cable networks (except Bravo) to a new company to be called Versant, and it might seem like WBD is playing follow-the-leader, splitting off everything that’s not actively contributing to its streaming business to get its fading linear cable businesses off the books. But there are some key differences. Most of the networks Comcast is spinning off don’t really provide much value on their own; USA airs sports content but most of it was purchased by NBCUniversal, usually with NBCSN being the originally intended cable outlet, and will now effectively be sublicensed out to Versant, and NBCU’s most recent major sports rights deals with the Big Ten and NBA have left out USA entirely in favor of signing rights for the NBC broadcast network and Peacock alone. Very few Versant outlets air much in the way of truly original programming, at least outside cheap true crime documentaries; the main outlets producing real value on their own would probably be CNBC and MSNBC.
That is not the case with the WBD split. While Comcast is keeping all of NBC Universal’s sports rights, the sports rights WBD holds under the TNT and Eurosport banners will be going with the “Global Networks” division, which I’ll be referring to as “Turner Discovery” for the rest of this post while referring to “Streaming and Studios” as “Warner Bros.” CNN is still a going concern and arguably still a stronger news brand than MSNBC, plus there’s all the documentary and reality programming from the Discovery networks and kids’ and other animated programming on Cartoon Network. (In fact, there’s an open question as to whether or not Cartoon Network will really be separated from the studio that effectively produces all of its programming – and it’s an especially pressing question at Adult Swim, which effectively is Williams Street, the studio that not only produces all of its original programming but runs the network/block.) All of this would be valuable content for any streaming service; indeed, Turner Discovery will not only be coming with an existing streaming service in discovery+, but is working on a new one for CNN.
The problem is, though, it hasn’t added that much value to Max. WBD chair David Zaslav has admitted that sports has not been a major driver of Max sign-ups (unlike with Peacock), and Max’s failure to gain traction in the kids-and-family space has raised questions about the future of Cartoon Network more generally and led them to not only strip Max of most kids’ content in favor of continuing to license to outside streamers, but increasingly, to produce new kids’ series for those streamers as well. The rebrand back to HBO Max is effectively an admission that the one thing that actually has provided value to the service has been the sort of prestige TV and movies that have long been HBO’s bread and butter, and this split is effectively an announcement that WarnerMedia intends to focus the service on those things nigh-exclusively.
It’s a disappointing outcome for HBO Max, to say the least. When Netflix was ramping up its original content production, they took aim squarely at HBO’s image as the premier brand in prestige TV, declaring that they intended to “become HBO before HBO could become us”. In the WBD era, it became increasingly apparent that HBO wasn’t even going to try. I felt that WBD and its predecessors at WarnerMedia and Time Warner were better positioned for the streaming era than any other legacy media company other than Disney, simply because HBO was already what Netflix was trying to pattern themselves after and they just needed to leverage that, the considerable animation library Cartoon Network had built up, the Turner networks’ portfolio of sports rights, and more. As other studios lost the game of musical chairs or were too small to even attempt to compete, and resorted to becoming “arms dealers” to various streamers, HBO already had a history of being the outlet that other studios licensed their content to. If there was enough room for another streaming company after Netflix, Amazon, Disney, and Apple, I felt that Time Warner/WarnerMedia was it, and for a time HBO Max did come out the gate stronger than any streaming service not owned by the first three (or YouTube). Now, however, Max has fallen behind Paramount+ and Peacock, and increasingly looks like the odd one out among legacy media streaming services.
TNT’s loss of NBA rights probably doomed TNT Sports to start circling the drain, but it’s not like the NBA was doing a particularly good job of attracting audiences to Max before then (though Max’s inability to launch a separate sports tier didn’t help), and it doesn’t explain everything else that has bedeviled the service. My diagnosis is that Max has fallen victim to poor timing and poor leadership that was unwilling to properly invest in the service. The launch of the service was frustrated by the obstacles the first Trump regime placed in front of the AT&T merger, resulting in the service launching after the pandemic had kicked into high gear and halted production of original programming, and then just as the world was recovering from that, WarnerMedia was spun off into Warner Bros. Discovery, under the helm of Zaslav who quickly became notorious for his draconian cost-cutting (including underbidding for the NBA to begin with). WBD’s streaming business is profitable unlike those of Comcast and Paramount, but that likely has been achieved by ratcheting back its content spend considerably, which is likely to hurt Max in the long run.
Zaslav infamously attempted to write off completed or nearly-completed movies for tax purposes, but the degree to which Max has been less active than its competitors, and less decisive as to what it wants to be, goes beyond that. While Comcast and Paramount went all-in on sports as a differentiating factor for their streaming services from the start, it wasn’t until 2022 that HBO Max announced the addition of exclusive sports at all with TNT’s deal with US Soccer, and it wasn’t until late 2023 that it announced the attempted sports add-on package. Having been hesitant to invest in original kids’ programming to the extent of Netflix or Disney+, WBD has proceeded to remove much of what they do have from the service and license some of it out to others, which has been good for the company’s cash flow but not for the growth of (HBO) Max. Rather than going all-in on (HBO) Max as the core of the company’s business going forward, making their entire library available there and only there while leaving the doors open to any studio willing to license to them, it’s felt like WBD and its predecessors have dipped their toe in the waters of streaming but lost heart when it didn’t produce the immediate results they hoped for. Other legacy media companies, with the possible exception of Disney, have engaged in similar wishy-washiness, but WBD arguably has Comcast and Paramount beat.
“I think David Zaslav has made the decision, they are not competing against Netflix,” Rich Greenfield said on John Ourand’s Varsity podcast Wednesday. “They are not trying to build a global-scale, be-everything, watch everyday, they are trying to, you know, if you think about what HBO is really known for, it’s the five or six shows a year, some great library content, whether it’s Friends or Big Bang Theory, but really leaning into what they’re known for and not trying to compete with the Netflixes and Amazons of the world.”
The original sin that may have crippled the various WarnerMedia incarnations from truly attempting to compete with Netflix before they even started was the massive amounts of debt they have always carried, a legacy arguably going all the way back to the failed AOL Time Warner merger a quarter century ago. The bulk of that debt will now be weighing down the Turner Discovery side of the split (which will not be the case with Versant), meaning a company that should have plenty of content that would be valuable to a streaming service, not to mention multiple existing streaming services, will be saddled with enormous amounts of debt hindering their ability to do anything with it, while also serving as a poison pill dissuading any company that might want to acquire that content from making an offer for the company.
My original idea for this post involved going through what the various outcomes might be for Turner Discovery to be acquired by another content company, but Sports Media Watch not only did that, but effectively laid out how no company looking to actually make a business out of any of their acquisitions would actually want to buy Turner Discovery. In the past, more networks meant more leverage in carriage fights, and that may still be the case to some extent, but these days they may be more of a liability if they don’t provide enough value on their own, and even media companies that haven’t cast off their linear cable networks have backed off bundling at all costs. Disney attempted to combine its sports rights with those of TNT and Fox to form Venu Sports, which collapsed in a flurry of lawsuits, and between that and the lingering bad taste of the acquisition of most of the Fox assets, they aren’t likely to be in the mood to take on a debt-laden company with outdated businesses. Neither is Comcast, which just announced the Versant spinoff and isn’t about to take on the same sorts of businesses they just spun off, and merging with Versant wouldn’t add anything and would make it harder for anyone else to buy the combined company (and Versant head Mark Lazarus has made clear that he doesn’t want to take on any debt-saddled companies).
Fox could be interesting for many of the same reasons as when they made a bid for Time Warner over a decade ago, and Paramount – a wild card as long as their proposed Skydance merger remains in limbo – remains a tantalizing merger partner with their complementary sports outlets to TNT’s (and the main sticking point in the past, the prospect of HBO and Showtime ending up under one roof, would no longer be a factor), but both companies are small enough that taking on too much debt could actually be killer – and if that’s the case for them it certainly would be even more the case for a smaller company like Nexstar. (Although with Zaslav implying that TNT’s sports rights are likely to eventually leave HBO Max, Paramount+ may make a lot of sense as a destination for them even short of a full-on merger, especially for March Madness which the two companies already work together on. Awful Announcing has a rundown of other potential streaming destinations for TNT Sports content, with an emphasis on ESPN and Amazon in addition to Paramount.) Netflix, Amazon, Google, and Apple could absorb the debt as well as anyone, but probably have even less interest in linear cable networks than legacy media companies do, and might feel that they can wait out the clock on TNT’s biggest sports rights deals that will be coming up for renewal in the next few years and bid for them themselves. And, of course, the one thing all of those companies have to be wondering is: if all these networks didn’t help Max, how valuable can they really be to a streaming service? You can argue that their failure to help Max was more the result of Zaslav’s mismanagement than their actual value, but it’s not like Max is completely devoid of value.
All of which means that while Eurosport remains a powerful brand in Europe, TNT Sports as one of the five major sports-airing entities in the United States, already arguably increased to six with the rise of Amazon, may officially be a dead company walking. I mentioned how TNT’s biggest sports rights deals will be coming up for renewal soon; specifically, the MLB and NHL deals, and sublicense for the College Football Playoff, are all slated to expire in 2028, which could leave their remaining rights decidedly in limbo if Turner Discovery doesn’t come up with a better solution than farming out their rights to other companies. As Greenfield notes, the choice of WBD’s CFO, Gunnar Wiedenfels, to lead Turner Discovery suggests that that half of the split will be focused on heavy cost-cutting over all else, and he expects the company to basically pull out of any sports rights negotiations, even as they had been talked up as contenders for Formula One and UFC rights. TNT Sports could benefit as a linear home for sports with streaming deals elsewhere, something Fox has benefitted from as the English-language linear home to MLS in the wake of the Apple TV deal, and which TNT itself is already starting to benefit from with the start of the Club World Cup sublicensed from DAZN; as such I wouldn’t rule them out for Formula One or UFC rights just yet (especially since the Canadian Grand Prix moving to the weekend of the Indy 500 likely rules out Fox as a contender for F1). But would it really be worth it to spend money on those things?
When the company then known as Viacom announced that it was splitting into CBS Corporation and the “new” Viacom in 2005, the perception was that the company was siloing the businesses that were thought to be in decline – namely, the CBS broadcast network – and keeping them from being a drag on the portions of the business that were actually making money – which, at the time, was Viacom’s basic cable networks that were still collecting free subscriber fee money from the cable bundle. Things didn’t work out that way; the retransmission fee marketplace took off not long after as sports – which CBS had and Viacom didn’t – became the core of the cable bundle, and between that, Les Moonves’ savvy management of CBS, and some stumbles on the Viacom side, within a few years it was CBS that was on a roll and Viacom that was in decline. It’s hard to see anything like that happening this time. There are certainly scenarios where Warner Bros continues to go into the dumpster and the split does nothing to stop HBO Max from becoming a complete failure, but it’s hard to see what sort of future Turner Discovery could possibly have. Both this split and the Versant one effectively amount to casting off a bunch of outdated businesses and leaving them to fail – and as such, the most likely people to invest in them, let alone buy them, are the sort of “vulture capital” private equity firms that effectively make their money off the back of failing businesses.
Over the years I’ve written extensively about how the technology of linear television remains valuable even if the broken economic model and regulatory environment surrounding it obscures that value, but that was always primarily about broadcast television, which can make more efficient use of the public over-the-air spectrum that it has to share with every wireless carrier, as opposed to the bandwidth used by wired Internet providers that’s significantly less scarce. Even then the NFL’s ventures into streaming of its games has been successful enough as to greatly lower my expectations of how many linear outlets are actually needed – maybe as few as two, and I’m only willing to say that many because of the regular occurrence of the World Series going up against major primetime NFL games – and if there’s more it’s likely to be explicitly as an extension of paid streaming services. Such linear outlets are primarily valuable for sports and other live events that everyone feels the need to watch at the same time; scripted and other taped content only really benefits from linear television under rather specific circumstances. Many if not most of the linear cable networks out there don’t have any original programming at all – certainly that’s the case for all but a handful of the Versant networks – but even the ones that do face an uncertain future. The ESPNs and FS1 seem to be in good shape, but the launch of ESPN’s upcoming direct-to-consumer service shows that Disney doesn’t see linear cable as the future of ESPN, and if TNT and TBS can be written off like this most other networks don’t seem to stand much of a chance – and those are all networks that actually carry sports rights.
In that light, Comcast’s decision to leave Bravo out of the Versant spinoff is telling. The reason is that Bravo’s reality programming, most famously but not limited to the Real Housewives franchise, has been valuable to Peacock to the point of the Bravo brand being an important part of the service. In some ways, it makes it all the more surprising that the similarly female-oriented reality-focused networks Food Network, HGTV, and TLC haven’t similarly been good for Max, but it’s apparent that WBD now wants to create a firm distinction between HBO Max with the sort of “prestige TV” that HBO is known for, and the more lowbrow reality content that populated discovery+ before the Warner Bros merger. Nonetheless, it shows that for the moment, a linear cable network with a strong brand attached to original content that can actively contribute to a streaming service can get by on that for the time being. The question is, how much longer will that be the case, and is their continued survival merely a bridge to becoming a brand within a larger streaming service?
Two years ago Charter stood its ground in a dispute with Disney and allowed the almighty ESPN network to go off the air for over a week, eventually winning numerous concessions including the ability to bundle Disney’s streaming services to its video customers at a discounted rate and dropping all but a handful of Disney’s non-sports networks, seemingly condemning those networks to death. I thought it was inevitable that Charter and other distributors would take a similar approach with other media companies’ networks and attempted to figure out which other networks might be on the chopping block, but while Charter did strike agreements with other media companies to bundle their streaming services with Charter’s video service, they didn’t drop any linear networks. Now we see what the fate may really be for other companies’ networks, particularly those too popular to drop outright but without strong enough programming to contribute to the streaming services that the legacy media companies see as the future of their business: left to float in the wind and enter their inexorable decline without serving as a drag on the books of their current parent companies, but without their protection either. It’s the return of cable network musical chairs, but with more profound consequences when the music stops: if you don’t have a strong enough brand to contribute to your parent company’s streaming service, you won’t be shut down right away, and viewers won’t be deprived of whatever original content you might have immediately, but you might be cut loose and doomed to eventually drown. (Notably, the three Disney-owned entertainment networks that kept their place on Charter lineups – Disney Channel, FX, and Nat Geo – all fit the same mold as Comcast keeping Bravo in their own fold, as prominent brands for content that’s valuable for Disney+ or, in FX’s case, Hulu.)
(What this means for Paramount, should they decide to cut bait on their cable networks at any point, isn’t clear; I could certainly see a scenario where they decide to dump all their cable networks with the exception of Showtime and possibly CBS Sports Network, despite MTV and BET having once been identified as being among the old Viacom’s “core brands” – Paramount even shopped around for a buyer for BET at one point. South Park and SpongeBob SquarePants are two of Paramount+’s most popular shows, which suggests that Comedy Central and Nickelodeon, especially the latter, could be valuable enough for Paramount to keep – especially if The Daily Show adds enough value to Comedy Central’s brand – and for all I know they could feel the same way about Paramount Network. But Nickelodeon has a bunch of auxiliary networks no one watches – Nick Jr, TeenNick, and Nicktoons, just to name a few, although Nick Jr was once considered a “core brand” separate from Nick proper – and it’s hard to see them leaving the fold while Nick itself remains in place, so if Paramount does decide to keep Nick while spinning off most of their other networks, those auxiliary networks could be headed for the chopping block.)
One point Greenfield made on Ourand’s podcast was that the most likely explanation for why legacy media companies had kept their cable network portfolios around up until now was essentially that they didn’t know what else to do with them. They still had some value as sources of subscriber fee and advertising revenue, as well as (in some cases) a place to premiere original content, even as they increasingly became a drag on their parent companies’ books overall compared to their shiny new streaming services. So even if they didn’t have a future, legacy media was content to wring as much value as possible out of their present until it wasn’t worth it anymore. Between the Versant and WBD splits and Disney’s launch of direct-to-consumer ESPN later this year, 2025 marks the point where legacy media declared the end of the cable bundle as a significant contributor to their businesses. What’s left is the remnants of the cable era set to wither away however the fates treat them, no longer the concern of the major media conglomerates they once supported.