Did David Zaslav’s Grand Vision Fail? As WBD and Other Media Giants Move Pieces Around, They Can’t Outrun the Cable Math

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Four years ago, David Zaslav emphasized that the combination of Discovery Communications and what was previously known as WarnerMedia was greater than just their individual components. He referred to it as a “powerful” collection of international resources.

As a movie buff, I can’t help but see the synergy when you bring us all together – Batman, Superman, Wonder Woman, the epic worlds of ‘Game of Thrones,’ ‘Sex and the City,’ and more. When HBO and Discovery unite on a global scale, offering local content everywhere, it’s clear we’re stronger united than apart.” (Said in 2021, explaining the rationale behind merging Discovery and WarnerMedia, then owned by AT&T.)

Reflecting on today’s landscape, it appears that the numbers game has shifted. Zaslav, who was once the architect of this grand amalgamation under one roof at Warner Bros. Discovery, has now decided to dismantle it. In essence, the combination that was once hailed as formidable is now burdened by a decrease in revenue, audience engagement, and profits within their linear TV assets.

According to the announcement made on Monday, Warner Bros. Discovery is planning to split into two separate entities:

1. A combined entity consisting of Warner Bros.’ film and television studio, HBO Max, and its games and experiences division, which will be led by Zaslav.
2. A new company that will encompass CNN, TNT, TBS, Discovery, Food Network, HGTV, and other channels primarily based in linear cable, along with Discovery+ and Bleacher Report. This new company will also oversee the yet-to-be-named spin-off of the cable TV division, with Gunnar Wiedenfels, the current CFO, taking on the leadership role for this venture.

On Monday morning, it appeared that Wall Street approved of Zaslav’s decision, as WBD shares had been trading below $10 since early April. However, the positive momentum initiated by Monday’s news, which caused a 7% surge immediately following the closing price of $9.82 on Friday, has since dwindled. The stock has subsequently fallen and wiped out those initial gains, currently trading in the red.

It’s important to note that the problems faced by the media and entertainment industry extend beyond just WBD and Zaslav. In fact, as hinted in our February cover story on Comcast’s intention to separate most of its NBCUniversal cable channels, these changes were not going to be a one-time event. True to our prediction, Warner Bros. Discovery confirmed this earlier today by announcing their decision to split the company into two distinct entities.

Warner Bros. Discovery, much like Comcast before them, feels the same pressures driving the decision to sell off their cable operations. By separating the Warner Bros. studio and HBO Max from traditional cable channels, they aim to insulate these assets from cable’s ongoing issues. However, this move also increases the demand on Warner Bros.’ film and television divisions to perform well financially.

The main idea: Large media companies have the ability to shuffle their financial holdings – for instance, Warner Bros. Discovery has been undergoing restructuring for a span of three years – however, eventually, the accounting equations will align with their actual earnings.

For Zaslav, there will be fewer opportunities to conceal potential issues in their earnings reports if the cash flow from the cable division is excluded. At present, cable TV channels continue to provide a steady stream of income that conglomerates like WBD and NBCU have come to depend on. However, looking ahead, this source of revenue can be likened to a melting ice cube as advertising revenues and affiliate fees are expected to decline in the near future, accompanied by a decrease in the traditional cable subscriber base.

The disconnection from traditional cables will have financial consequences for the industry, which has been struggling with widespread job losses. For nearly 30 years, starting around 1985, cable networks served as a major contributor to the growth of media and entertainment empires. However, streaming services like HBO Max and NBCUniversal’s Peacock are not yet capable of generating the dual revenue streams that channels such as USA Network, Syfy, E!, and Oxygen produced when they were at their peak in the late 2000s under NBCU.

In November 2024, NBCUniversal initially revealed its plan to spin off, and Comcast’s executives, Brian Roberts and Michael Cavanagh, highlighted that the independent division of channels (now known as Versant) would have increased freedom for potential mergers or acquisitions. There have been discussions about a massive consolidation of cable networks, based on the idea that some companies might seek to gain market share, even in a sector facing decline.

However, if there’s a strong trend towards cable TV mergers and acquisitions, it seems that Wall Street and bankers are keeping this under wraps effectively. It’s possible that usual M&A activity has been temporarily halted due to the economic uncertainties caused by President Trump’s bold actions such as tariffs and other policy decisions.

For the majority of his professional life, Zaslav has been deeply immersed in the world of cable television. Upon joining NBC in 1989, he played a significant role in creating and launching CNBC and MSNBC. He then moved to Discovery in 2006. Now, Zaslav believes that Warner Bros. Discovery’s (WBD) future is centered on streaming platforms like HBO, as well as the studios that generate TV shows and movies for these platforms. Consequently, he’s preparing traditional cable channels to navigate their own journey towards success or failure independently.

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2025-06-09 21:16