CNBC: WBD next to spin cable assets

[michael hagerty]

The Hollywood Reporter story based on original CNBC reporting:

Sounds Like Warner Bros. Discovery Will Have Its Own SpinCo in the “Not-Too-Distant” Future

CNBC’s David Faber reports that a spinoff of Warners’ cable channels is imminent.

www.hollywoodreporter.com

 

[TheBigA]

Wall Street seems to be very excited about this news. WBD stock shot up a full point, peaking at 9.20, although it has leveled off a bit.

They announced 1st Q earnings today as well. Losses have narrowed:

Warner Bros. Discovery Reports First-Quarter 2025 Results - Warner Bros. Discovery

Warner Bros. Discovery, a premier global media and entertainment company, offers audiences the world's most differentiated and complete portfolio of content, brands and franchises across television, film, streaming and gaming. The new company combines WarnerMedia's premium entertainment, sports...

www.wbd.com

My view on the split is it makes sense. I anticipated this after the NBCUniversal spin a few months ago. They're both suffering from the same problem. WBD hasn't really done much to consolidate its cable holdings. Still a lot of duplication. No real channel development taking place. A spinoff would indicate a lack of buyers, which is what we've seen from all companies including Paramount.

 

[tall_guy1]

They're planning to split the assets, so it would be easy. Right now, it's just speculation though.

 

[secondchoice]

I wonder why content provider's don't keep some of their cable assets. They would have some leverage on selling their movies. If someone else can buy your stuff and make money off of it why not keep it inhouse and keep all the profits. Isn't Fox is "reclaiming" some of their old studios?

 

[TheBigA]

I wonder why content provider's don't keep some of their cable assets. They would have some leverage on selling their movies. If someone else can buy your stuff and make money off of it why not keep it inhouse and keep all the profits. Isn't Fox is "reclaiming" some of their old studios?

The Fox deal with Disney included a ten year lease on the Fox Studios. The reason for that was to give the shows time to adjust to being owned by Disney. Over the years, those shows have moved physically from Century City to Burbank. So yes, now the Fox Studios are back under Fox control.

What's happening with NBCUniversal and now WBD is they're splitting off the cable assets so the losses there don't count against the main company. They still own the split off company. But it has its own stock. People who own WBD stock will get shares in spinco. Therefore they still profit when HBO airs a WBD movie.

 

[secondchoice]

I inherited WBD stock via AT&T . Still waiting for the "big payday" that was promised.

 

[radiofan2023]

I inherited WBD stock via AT&T . Still waiting for the "big payday" that was promised.

Better than inheriting Cumulus stock!

 

[Don CT]

I inherited WBD stock via AT&T . Still waiting for the "big payday" that was promised.

Why did AT&T buy TimeWarner in the first place.

 

[Weiserguy]

I inherited WBD stock via AT&T . Still waiting for the "big payday" that was promised.

Me too, but I finally ran out of patience and dumped it at the end of last year. Tiny "paper" profit, paid a few bucks to Uncle Sam for cap gains tax, and now there's one less thing to monitor. Maybe consider doing the same?

 

[Weiserguy]

Why did AT&T buy TimeWarner in the first place.

Arrogance. "We manage a portfolio of businesses. We can run any business, they're all the same." A legacy phone company is a cellular network is a nationwide internet provider is a Hollywood studio is a stable of ad-supported channels. Arrogance.

The e-x-a-c-t same reason so many other companies get in over their heads with businesses they know nothing about. They cut a deal to acquire some company, and then dump the previous management that actually did know how to run it, then wonder why things went wrong.

 

[michael hagerty]

Arrogance. "We manage a portfolio of businesses. We can run any business, they're all the same." A legacy phone company is a cellular network is a nationwide internet provider is a Hollywood studio is a stable of ad-supported channels. Arrogance.

I mean---it's not like RCA buying Hertz Rent-a-Car in 1967 or Reynolds Tobacco buying Nabisco.

AT&T owned DirecTV at the time, and Comcast had just bought Universal five years earlier. At the time, it made some sense in terms of scale---owning production and distribution of entertainment. The Warner film library (including everything Ted Turner had bought decades before) was a significant asset.

 

[TheBigA]

AT&T owned DirecTV at the time, and Comcast had just bought Universal five years earlier. At the time, it made some sense in terms of scale---owning production and distribution of entertainment. The Warner film library (including everything Ted Turner had bought decades before) was a significant asset.

The other part was they were looking to grow U-Verse into a bigger thing, and needed content for it. After U-Verse was such a flop, the whole need for streaming content went away. Instead AT&T redirected its energies into the fiber business.

 

[davideduardo]

Arrogance. "We manage a portfolio of businesses. We can run any business, they're all the same." A legacy phone company is a cellular network is a nationwide internet provider is a Hollywood studio is a stable of ad-supported channels. Arrogance.

Warren Buffet would have some words to say about your condemnation of diversification. Or Welch's General Electric.

AT&T tried to diversify in a field; it sure worked for Proctor & Gamble and many others.

 

[tall_guy1]

The other part was they were looking to grow U-Verse into a bigger thing, and needed content for it. After U-Verse was such a flop, the whole need for streaming content went away. Instead AT&T redirected its energies into the fiber business.

Why did AT&T leave the TV business? HBO Max worked well for them, and their channels I think didn't fall off under their control.

 

[Weiserguy]

Warren Buffet would have some words to say about your condemnation of diversification. Or Welch's General Electric.

AT&T tried to diversify in a field; it sure worked for Proctor & Gamble and many others.

"Warren Buffett" is a subject I know something about, as a longtime shareholder of Berkie. Warren accumulates solid businesses. "Great companies at fair prices," as his late partner Charlie Munger liked to say.

What Warren knows how to do is evaluate the intrinsic value of a company, and the character of their ownership/management. What he does not do is presume to know how to run any of his companies after acquisition (with the possible exception of Berkshire's insurance operations, and even there he relies on each company's incumbent management and internal experts), much less all of them.

He also never tries to execute a hostile takeover. That's because he doesn't want to acquire a hostile management along with the company, nor does he want to have to fire the management and backfill them, or worse, try running it himself.

Jack Welch was a whole different story. He was the antithesis of Buffett, and it took years for his various sins and shenanigans to come to light. But eventually they did, long after he'd divorced his wife, married his paramour/biographer, taken his golden parachute and ridden off into the sunset. But the arrogance of which I wrote nearly sank General Electric, and definitely sank a successor or two.

Homework assignment, David. Go back up to #10 and re-read what I actually wrote.

 

[Weiserguy]

I mean---it's not like RCA buying Hertz Rent-a-Car in 1967 or Reynolds Tobacco buying Nabisco.

AT&T owned DirecTV at the time, and Comcast had just bought Universal five years earlier. At the time, it made some sense in terms of scale---owning production and distribution of entertainment. The Warner film library (including everything Ted Turner had bought decades before) was a significant asset.

Did the RCA guys try to run Hertz? Did the tobacco guys try running Nabisco? They were investments, and as I recall they kept the management largely in place and figured out, as a conglomerate, how to prioritize capital amongst the new acquisitions and the legacy businesses.

AT&T is a "plumbing" company. Their plumbing is telecommunications. Networks, circuits, transmission cables, wires, central offices, interconnects. Desktop phones, private branch exchanges, more recently cellular phones. They have historically been content-agnostic. They were the original common carrier. You pay for your circuit, or your time-share of a common circuit, it doesn't matter what content is getting transmitted -- as long as it's not illegal nor cause damage to the network. The sin of the San Antonio guys (unlike original AT&T* up in NYC and Basking Ridge) is they had that arrogance I was just describing. They came in with that "we can manage anything" attitude, then discovered that no, they couldn't. And it cost them a fortune to find out, and then extricate themselves from their massive f*ck-up. (And BTW, here again, I know something of whence I speak.)

*Not that the old T didn't have it's own bouts of expensive arrogance. If anyone's interested, Google "NCR acquisition". Edit: Or "AT&T Broadband". Or, even more to my own professional experience, "At Home Networks" or "Excite@Home".

 

[TheBigA]

They came in with that "we can manage anything" attitude, then discovered that no, they couldn't. And it cost them a fortune to find out, and then extricate themselves from their massive f*ck-up. (And BTW, here again, I know something of whence I speak.)

My view is it wasn't "they." It was one guy: John Stankey. He had no media experience at all, with a career in telecom, and he made himself CEO of Warner Media. After several terrible years, he either had the brains or accepted the reality that he knew nothing about the media, and presided over the sale of Warner to Discovery. At the time, it seemed like a great idea. Discovery was a well run company. But I'm at the point where it's an unmanageable company in its current structure. So I'd approve the spin off.

 

[michael hagerty]

Did the RCA guys try to run Hertz? Did the tobacco guys try running Nabisco? They were investments, and as I recall they kept the management largely in place and figured out, as a conglomerate, how to prioritize capital amongst the new acquisitions and the legacy businesses.

RJR Nabisco was a disaster. I heartily recommend the book “Barbarians at the Gate”, but this is a succinct brief on what led up to that:

RJR Nabisco Scandal: Corporate Kleptocracy Exposed

Discover the RJR Nabisco scandal, highlighting corporate kleptocracy in the 1980s. Explore the reckless spending and the famous bidding war detailed in "Barbarians at the Gate."

www.investopedia.com

AT&T is a "plumbing" company. Their plumbing is telecommunications. Networks, circuits, transmission cables, wires, central offices, interconnects. Desktop phones, private branch exchanges, more recently cellular phones. They have historically been content-agnostic. They were the original common carrier.

That’s what AT&T was until the breakup into the “Baby Bells”.

From that point (1984) on, AT&T, to thrive, had to grow outside its roots. That meant cable, then DirecTV, putting them in the position I described: Comcast bought Universal, and to compete, they believed they needed Warners.

 

[Weiserguy]

RJR Nabisco was a disaster. I heartily recommend the book “Barbarians at the Gate”, but this is a succinct brief on what led up to that:

RJR Nabisco Scandal: Corporate Kleptocracy Exposed

Discover the RJR Nabisco scandal, highlighting corporate kleptocracy in the 1980s. Explore the reckless spending and the famous bidding war detailed in "Barbarians at the Gate."

www.investopedia.com

That’s what AT&T was until the breakup into the “Baby Bells”.

From that point (1984) on, AT&T, to thrive, had to grow outside its roots. That meant cable, then DirecTV, putting them in the position I described: Comcast bought Universal, and to compete, they believed they needed Warners.

The difference is that Comcast is a cable television company, and NBC is a TV network with a side of owned/operated TV stations. The Universal studio was acquired (though just barely) when the whole shebang was still under GE, and Universal came along for the ride. (In fact their big contribution was removing the space between "NBC" and "Universal" in the logo.) GE had already figured out how to integrate the two, and how much needed active managing, verses sitting back and letting them manage themselves.

 

[TheBigA]

From that point (1984) on, AT&T, to thrive, had to grow outside its roots. That meant cable, then DirecTV, putting them in the position I described: Comcast bought Universal, and to compete, they believed they needed Warners.

So now both companies are spinning off their cable assets, because they're obviously a drag on the rest of their companies. Paramount will arrive at the same conclusion. As much as I criticized Stankey, he realized that pretty quickly at Warner. He couldn't understand why Warner was investing so much in TBS. He redirected that money to HBO.