Complex financial engineering doesn’t usually intrigue Hollywood executives, but recent moves by Comcast and Warner Bros. Discovery, as well as a fateful decision by Disney last year, are making it more popular on media company boards. The curtain is being quietly pulled back on the difficult and heated debate. industry.
Indeed, Comcast’s decision to spin out (most of) its cable channels and Warner Bros. Discovery’s restructuring move to separate its linear cable channels from its studio and streaming operations are likely to raise concerns about the potential for a deal and Wall Street. It is carried out under the name of hand wave. .
But while the deal shines in CEOs’ eyes, a cold reality looms before them. Because of cord-cutting, the assets in their portfolios, the cards they hold, are losing value every day. But there are probably only a few things that could come out of the current mess that are even more valuable than before.
This is why these companies are buying them up even as they consider bigger deals.
A quick look reveals several themes emerging. Studios, both film and television, are valuable assets and fountainheads of intellectual property that form the core of these companies’ content engines. Movie studios, in particular, are considered brand builders at a time when demand for intellectual property remains high.
Similarly, broadcast networks are a prime asset given their established three-letter brands, reach and scale in sports and news.
And even a handful of stray cable channels are finding themselves among the crown jewels, with their parent companies expressing confidence that they can survive the cable TV apocalypse.
Look at Warner Bros. Discovery. The company has divided its business into two areas: “Global Linear Networks” and “Streaming and Studios.” On one side are the company’s cash cows, linear TV channels like CNN, TNT, and TBS. The other is Warner’s movie and TV studio and streaming service Max, which is expected to grow in the future.
But Warners is also strategically acquiring HBO, one of the best-known brands from the cable TV era, to put it in its streaming and studio bucket. For WBD, HBO is a crown jewel, not an asset to be stashed away with other declining cable networks.
Comcast’s cable split means it will keep its TV and movie studios, but separate its linear channels, similar to Peacock. That means, with a few exceptions, NBC and cable channel Bravo will remain on Comcast, as will everything from USA and MSNBC to E! And the Golf Channel goes to SpinCo.
Of course, NBC is the flagship broadcaster and will add NBA and WNBA games next year, significantly increasing its sports programming output. Bravo, on the other hand, has managed to establish a clear brand identity thanks to franchises like Real Housewives and Below Deck (which it calls “high-class, sleazy reality TV”), and that has led to Peacock’s ratings. is a major driving force behind this, said a person familiar with the numbers. .
Even if cable TV were to disappear, the Bravo brand would survive.
And while companies like Disney and Paramount haven’t restructured like Comcast and WBD, they’ve quietly signaled that their priorities are in some sub-brands and not others.
Last year, Disney became embroiled in a shipping dispute with Charter Communications, the nation’s largest pay-TV provider. The two sides struck a deal that fixed rates and transportation costs for ESPN, ABC, Disney Channel, and others, but left many cable channels, including Freeform, FXX, and Disney Junior, in the lurch. .
“We protected our major entertainment channels,” Disney Entertainment co-chairman Dana Walden told THR after the deal was completed. “As you know, these are very important to our revenue and very important to our pipeline from family and general entertainment content to DTC services.”
And at Paramount, Skydance is actively considering plans to close the deal next year. Paramount studios, especially the storied film studio, are safe. That’s understandable, but in television it’s even more complicated.
Incoming president Jeff Shell told reporters over the summer that he views CBS as a “jeweled” asset but intends to “manage it a little more aggressively for cash flow.” And they laid out a vision to make Paramount+ a dominant player in the streaming industry, perhaps through partnerships with other players.
But traditional Viacom cable channels like MTV, Comedy Central, Nickelodeon, and BET aren’t as high of a priority. After the deal closes, the company will likely consolidate its television networks and consider spinning off or selling its cable channels, excluding CBS entirely.
2025 is shaping up to be a big year for deals, given the Comcast spinoff, the (presumed) completion of the Skydance-Paramount deal, and other potential combinations.
“In addition to WBD, other media companies are also expected to consider offloading some of their cable TV network assets in the future, which could facilitate an effective roll-up vehicle for the industry. “Yes,” a Bank of America research team led by Jessica Lief Ehrlich wrote in a December article. 19 report. “These assets should be better positioned as integrated, linear-focused vehicles with economies of scale that can drive affiliate and advertising negotiations and synergies.”
But the biggest entertainment companies seem to have already chosen winners and losers, shutting down their favored business units and leaving others isolated.
Brands and studios still matter in the streaming era, but companies at the heart of the entertainment business are already having to make tough choices about where to place their bets.
