MR. TITO: Warner Bros. Discovery is Splitting into 2 Corporations… What Does This Mean for AEW?
BREAKING NEWS as Warner Brothers Discovery (WBD) has announced that their company shall split into 2 separate corporations, one for “Streaming & Studios” which will consist of any movie or television making studios and its properties (DC Comics, Looney Tunes, etc.) while also including HBO and HBO Max because HBO Max is the “streaming” portion while the other is called “Global Networks” which will contain their television channels like TBS, TNT, CNN, TruTV, the many Discovery Channel networks, and digital platforms like Bleacher Report along with hosting any sporting events.
The split is expected to occur by mid-2026, if all goes well with shareholders, IRS for tax purposes and the tax-free transaction to allow this to split to occur, and other regulatory bodies.
Why would any corporation do this?
Well, sometimes you just get too large as a corporation that inefficiencies develop and there’s a lack of focus on individual properties that could make the company more money. For example, I’d argue that WBD is sitting on a ton of great Hanna Barbara cartoon properties that they barely use these days. By splitting up the bloated corporation, the smaller half can internally look to see what could be used to generate revenue. If not, the halved corporation can just sell said properties instead.
The biggest benefit of splitting as a corporation is for raising CAPITAL.
The most ideal way to raise capital for a publicly traded corporation is to sell shares of stock and allow the public to invest in your company. Then, the company just has to perform well and then more buyers of stock arrive to not only increase the stakeholders but to boost that stock prices as well.
The REAL issue with Warner Bros. Discovery is the amount of DEBT that they’ve accumulated throughout the years. The AOL merger was a total turd and that’s been affecting them for years. AT&T acquired AOL/Time Warner and didn’t have the best time managing the properties or the company, ran up more debt. Then, it was sold to Discovery for an expensive price tag. Lots of debt rang up for poor decision making plus all of these merger & acquisition costs that always happen.
Right now, their debt is $37.4 billion. To WBD’s credit, that’s actually down from $44 billion from the end of the year, but still a crippling amount of debt (for a lack of a better word).
BUT, if you split both companies into 2 separate corporations, both corporations can raise stock capital to help to payoff the debt that the studio properties or streaming service has rung up along with whatever debt that the television networks have created.
And then with 2 smaller corporations versus managing 1 bloated corporation, each executive team can review all employees, all departments, all assets and liabilities, and create strategies for how to manage their company and make them financially solvent again.
All Elite Wrestling (AEW), once this split commences, will be a “customer” of both the Streaming & Studios group, thanks to their content airing on HBO Max, and the Global Networks group thanks to their content airing on TNT, TBS, and Pay Per Views running through Bleacher Report. That cost would likely be renegotiated as separate deals with both corporations, and I’m assuming that was possibly built into the television rights contract since it was so recent?
The good news? The guys who agreed to sign AEW to upwards of a $280 million per year deal are still with each corporation. CEO of WBD David Zaslav will become President/CEO of the Streaming and Studios corporation (by the way, he HATES streaming) while CFO of WBD Gunnar Wiedenfels will become President/CEO of the Global Networks corporation. Thus, Tony Khan should have some established relationship with BOTH individuals and hopefully, that serves as a plus for AEW and a guarantee that their existing content deal can continue.
My prediction? I think that the Global Networks version will do fine but have issues down the road the further the decline for Cable/Satellite goes. Went from peaking at around 97 million households during the early 2010s to being around 70 million now. Both TBS and TNT struggle creating original content and are still too reliant on live sports and reruns/movies which the streaming services are digging into heavily too.
In my opinion, the HBO Max streaming service should have been placed with the Global Markets half rather than Streaming & Studios. Why? Because with HBO Max being lumped in with the movies/television studios allows cheaper distribution on the streaming service, but LOST VALUE for selling any television or movies elsewhere, including to the Global Network half. THIS is what is KILLING Warner Bros Discovery, Paramount Global, and Disney… When they host their own streaming services, they LOSE out on opportunities to sell their content elsewhere. Instead of making Netflix their own personal ATM machine, they LOSE money hosting bandwidth of streaming services and all of that opportunity cost of selling their content to other platforms.
If they added HBO Max to Global Networks, then HBO Max, with time, could obtain much of the households lost from Cable/Satellite as it kind of happens right now. Many people have cut the cord with Cable/Satellite but have HBO Max streaming service because they LOVE what the HBO studios creates. HBO Max should also be the place for the live sporting content, too, as it somewhat is now as a complete company. Things will change if they split this way.
HOWEVER, by having HBO Max with the Streaming & Studios group and TNT/TBS being with the Global Networks division, it allows for AEW and Tony Khan to negotiate with them SEPARATELY. Part of the problem with AEW obtaining the deal last year was dealing with the BLOATED Warner Bros. Discovery company who didn’t have the full time of the day to talk about a $280 million deal with AEW. Now, however, the Global Network half can focus on retaining and paying for content to keep people tuning into TNT or TBS without having the permission of the previously bloated WBD corporation.
This could be good for WWE, too, believe it or not. WBD was once one company with Channels and Streaming. Now they are 2 companies, one with channels and the other with streaming. In 5 years when WWE’s deal could be up with Netflix (if they don’t renew, opting out of the 10-year deal) and USA Network, WWE now has 2 separate corporations for negotiations, depending on their need to get into streaming or more cable/satellite channels.
The key here is if both the Streaming & Studios and the Global Networks halves can raise enough capital to pay down all of that debt accumulated from years of bad management, mergers & acquisitions, blockbuster movie failures (especially DC universe, yuck!!!), and just bad decision making with major properties that Warner Bros has. Plus, TNT, TBS, and CNN aren’t the cable powerhouses that they once were and the Cartoon Network used to be a favorite channel for many. Seriously, Ted Turner and the older Time Warner company have SUCKED since being acquired by the declining America Online (AOL) group who lost their financial arses literally moments after purchasing Turner/Time Warner from the Dot Com Crash of 2000-2001. All of those great properties and strong sports coverage has carried them through much of the 21st century but it’s damn near impossible to escape BAD management.
Fact is that Warner Bros. Discovery HAD to do something with over $40 BILLION in Debt through the end of 2024. Had they not opted to split up into 2 corporations and raise capital that way, they’d probably have to sell key properties to any buyers who could finance content for billions of dollars. But, by splitting up the corporation into 2 halves, they now have flexible capital options.
Think of it like the idea of WWE’s brand split… Split your roster into halves for RAW and Smackdown and in theory, it allows more opportunities to shine for wrestlers not previously focused. Many Ohio Valley Wrestling performers benefitted from the 2002 split and generally, the 2016 brand split has been successful and WWE has the financial statements to prove it.
So yeah, it’s a good day for AEW… The Debt sickness that has been plaguing their partner, Warner Bros. Discovery, has a chance to get more medication by splitting itself into halves and receiving more capital opportunities to pay down its debt. For AEW, however, they now have an additional corporation to negotiate with and that gives them extra leveraging power.
Win for wrestling fans, too, believe it or not… The more debt that WBD accumulates, they more they’ll attempt to place those higher expenses onto the prices of their goods and services. That includes the prices for Cable/Satellite to host TBS/TNT along with the subscription price for HBO Max. The better that WBD and its new 2 halves can manage its debt, the less than can shove down consumers’ throats through price hikes.
In other words, I approve of this WBD split and consider it a shame at how poorly managed Turner and Time Warner’s assets have been for the past 25 years.
If I were Tony Khan, I’d have my lawyers pouring over the contract details right now just to assure that this corporation split won’t affect television rights or payments. HOPEFULLY, this possibility was discussed and built into their contract.