David Zaslav has spent the better part of three years trying to prove that the mega-merger creating Warner Bros. Discovery was worth the trouble. Now he’s essentially admitting it wasn’t — at least not in its current form.
The company announced plans to split into two publicly traded entities: one housing its legacy linear television networks, the other built around its streaming and studio operations. It’s a dramatic reversal for a CEO who staked his reputation on the idea that bundling cable channels, a Hollywood studio, and a streaming service under one roof would create unstoppable synergies. The stock market’s reaction was swift. Shares surged more than 10% on the news, as Yahoo Finance reported, suggesting investors had been waiting for exactly this kind of structural overhaul.
The separation, expected to close in mid-2026, will create a standalone global streaming and studios business — encompassing Max, the Warner Bros. film and television studio, HBO, and the company’s gaming division — and a separate entity containing cable networks like TNT, TBS, HGTV, Food Network, Discovery Channel, and CNN. Zaslav will lead the streaming and studios company. Who runs the linear networks business hasn’t been announced.
That detail matters. A lot.
The linear television company will inherit a business in structural decline, saddled with roughly $30 billion in combined debt that Warner Bros. Discovery currently carries, though the precise allocation between the two entities remains undisclosed. Advertising revenue across the cable industry continues to erode. Cord-cutting isn’t slowing down. And the networks that once generated enormous cash flow — enough to fund Discovery’s $43 billion acquisition of WarnerMedia from AT&T in 2022 — are now depreciating assets that most media executives would rather not discuss at investor presentations.
Zaslav, characteristically, framed the move with optimism. “We believe that this is the best path to fully realize the significant value of our businesses and unlock long-term growth,” he said in the company’s announcement, according to Yahoo Finance. He pointed to the streaming unit’s growing subscriber base — Max reached approximately 117 million global subscribers — and its improving profitability trajectory as evidence that the studios and streaming business can stand on its own.
But the math behind the split tells a more complicated story. Warner Bros. Discovery reported $9.7 billion in revenue for the first quarter of 2025, a slight decline from the prior year. The company’s total long-term debt stands at roughly $35 billion when including certain obligations, and its stock has lost more than 60% of its value since the merger closed. Investors who bought into Zaslav’s convergence thesis have been punished severely. The split is, in part, an acknowledgment that the market simply refused to assign a premium — or even a fair multiple — to a conglomerate structure that blended fast-growing digital assets with declining linear ones.
This is not a new playbook. Zaslav is following a trail blazed by other media companies that concluded conglomerate discounts were destroying shareholder value. Lachlan Murdoch’s Fox Corporation was born from a similar logic when 21st Century Fox sold its entertainment assets to Disney in 2019 and retained its news and sports networks as a separate entity. More recently, Paramount Global explored and ultimately pursued a sale to Skydance Media rather than attempt a standalone restructuring. The entire media industry has spent the last five years trying to figure out what to do with cable networks that still generate cash but face an inevitable decline curve.
What makes Warner Bros. Discovery’s split particularly high-stakes is the debt load. The company has been aggressively paying down debt since the merger, reducing it by several billion dollars. But the remaining burden is enormous, and how it gets divided between the two new companies will determine whether either one has genuine financial flexibility. If the linear networks company absorbs a disproportionate share of the debt — a likely scenario, given that its cash flows are meant to service those obligations — it could become a slow-motion wind-down vehicle. Essentially, a company designed to harvest declining revenue streams while methodically paying creditors.
Not exactly an inspiring investment thesis.
The streaming and studios company, by contrast, would presumably emerge with a cleaner balance sheet, a growing subscriber base, and the creative engine of HBO and Warner Bros. behind it. That’s the entity Zaslav wants to run. And it’s the entity that Wall Street would likely value at a significantly higher multiple than the current combined company commands.
There’s a certain irony here. When Zaslav orchestrated the Discovery-WarnerMedia merger, the pitch was that combining these assets would create a content powerhouse capable of competing with Netflix, Disney, and Amazon. The cable networks would fund the streaming transition. The studio would feed content to Max. Everything would work together. Three years later, the conclusion is that these pieces are worth more apart than together — the precise opposite of the original merger rationale.
Industry analysts have been divided on whether the split will actually unlock the value Zaslav promises. Some point to the Max streaming service’s momentum as genuine. The platform has expanded internationally, added live sports programming through partnerships with the NBA and other leagues, and introduced an ad-supported tier that’s growing faster than its premium subscription offering. HBO’s content pipeline remains among the strongest in the industry, with franchises like “The Last of Us,” “House of the Dragon,” and “The White Lotus” drawing significant audiences and cultural attention.
Others are more skeptical. The streaming business, while improving, is not yet generating the kind of consistent free cash flow that would justify a premium valuation. Content costs remain high. Competition from Netflix, Amazon’s Prime Video, Apple TV+, and Disney+ shows no sign of abating. And the loss of the linear networks’ cash flow — which has historically subsidized content spending — means the streaming company will need to become self-sustaining faster than some analysts believe is realistic.
The timing of the announcement also raised eyebrows. Warner Bros. Discovery disclosed the split alongside its first-quarter earnings, which showed continued softness in advertising revenue and a modest decline in overall revenue. By coupling mediocre financial results with a transformative structural announcement, Zaslav effectively redirected the conversation away from near-term operational challenges and toward a longer-term strategic vision. It’s a classic executive maneuver. And the market, at least initially, bought it.
So what happens to the people who work at the linear networks? That question looms large. CNN, in particular, occupies an awkward position. It’s a prestigious news brand with global recognition, but its ratings have declined significantly in recent years, and its digital transformation — while progressing — hasn’t yet produced the kind of revenue growth that would make it an obvious fit for either entity. Zaslav has invested in CNN’s turnaround under CEO Mark Thompson, but the network’s placement in the linear company suggests it may not be considered a core growth asset.
The sports rights situation adds another layer of complexity. Warner Bros. Discovery recently secured a partial NBA rights package, but lost significant ground to Amazon, NBC, and ESPN in the broader negotiations. Live sports have been the primary reason many consumers still pay for cable television, and the ability to offer sports content on Max has been central to the streaming platform’s growth strategy. How those rights get allocated between the two companies — and whether the linear networks retain any meaningful sports programming — will significantly affect both entities’ competitive positioning.
There’s also the question of content licensing. Currently, Warner Bros. studio produces content that flows to both Max and the company’s linear networks, as well as to external buyers. After the split, the relationship between the studio and the linear networks would become an arms-length commercial arrangement rather than an internal transfer. That creates both opportunities — the studio could potentially license more aggressively to third parties — and risks, particularly if the linear networks lose preferential access to Warner Bros. content.
Wall Street’s initial enthusiasm for the split reflects a broader market preference for pure-play companies over conglomerates. Investors want to own streaming growth or cable cash flow, not a muddled combination of both. The conglomerate discount that has plagued Warner Bros. Discovery’s stock — and the stocks of other diversified media companies — stems from this fundamental tension. By separating the businesses, Zaslav is giving investors the choice they’ve been demanding.
But execution risk is real. Media company separations are complex, involving the untangling of shared infrastructure, technology platforms, advertising sales operations, and corporate functions. The process typically takes 12 to 18 months and costs hundreds of millions of dollars in one-time expenses. Warner Bros. Discovery has estimated the split will be completed by mid-2026, which is an ambitious timeline given the scale of the operation.
And then there’s Zaslav himself. His compensation has been a lightning rod for criticism — he was one of the highest-paid CEOs in America during a period when his company’s stock was cratering and thousands of employees were being laid off. The split gives him a chance to reset the narrative. If the streaming and studios company performs well as an independent entity, his legacy shifts from “the guy who overpaid for WarnerMedia” to “the guy who built a streaming competitor to Netflix.” That’s a much better story.
Whether it’s a true story remains to be seen. The streaming wars have claimed plenty of casualties already. CNN+ lasted barely a month before Zaslav shut it down upon taking control. Billions of dollars in content have been written off. The company’s market capitalization, which peaked near $60 billion shortly after the merger, has fallen to roughly $20 billion. A stock price recovery would require not just a successful separation but sustained operational improvement in the streaming business — subscriber growth, margin expansion, and disciplined content spending — over multiple years.
The linear networks company, meanwhile, faces an existential timeline. Cable subscriber losses are accelerating. Advertising dollars are migrating to digital platforms, particularly to connected TV and social media. The networks in Warner Bros. Discovery’s portfolio are strong brands — HGTV, Food Network, and Discovery Channel have loyal audiences — but loyalty doesn’t stop structural decline. The question isn’t whether these businesses will shrink. It’s how fast, and whether they can generate enough cash along the way to service their debt obligations and return capital to shareholders.
Some industry observers have speculated that the linear networks company could become an acquisition target — perhaps for a private equity firm looking to extract remaining cash flow, or for another media company seeking scale in a consolidating market. That possibility might actually be part of the strategic logic. A standalone linear company, unburdened by a streaming operation that demands constant investment, could be more attractive to a buyer focused purely on near-term cash generation.
For now, though, the split is a bet. A big one. Zaslav is wagering that the sum of the parts exceeds the whole, that Max can compete as a standalone streaming service, that the linear networks can survive independently, and that the market will reward clarity over complexity. He’s also betting on himself — choosing to lead the growth business and leave the declining one to someone else.
That someone else will have one of the toughest jobs in media. Running a portfolio of cable networks in 2026, with $15 to $20 billion in debt and a shrinking revenue base, requires a particular kind of executive — someone comfortable managing decline, extracting value, and making unpopular decisions about cost-cutting and asset sales. It’s a job that demands operational discipline, not creative vision.
The contrast with the streaming company couldn’t be sharper. That business needs a leader who can greenlight hit shows, negotiate global distribution deals, build advertising technology, and convince investors that the best days are ahead. It needs someone who can tell a growth story. Zaslav has positioned himself for that role, even if his track record on content decisions has been uneven at best.
One thing is clear: the era of the media mega-conglomerate is ending. AT&T’s acquisition of Time Warner. The Discovery-WarnerMedia merger. Viacom and CBS reuniting as Paramount Global. Each of these combinations was premised on the idea that bigger was better, that owning more content and more distribution would create competitive advantages. Each has struggled. The market has rendered its verdict, and it’s unambiguous. Focused companies win.
Whether Warner Bros. Discovery’s split produces two focused winners — or one winner and one slow-moving casualty — will depend on decisions that haven’t been made yet. The debt allocation. The leadership appointments. The content licensing terms. The sports rights assignments. These details, more than any strategic vision statement from Zaslav, will determine whether this $1.1 billion restructuring (the estimated cost of the separation) creates lasting value or simply rearranges deck chairs on a listing ship.
For an industry that has spent the last decade in a state of perpetual upheaval, the Warner Bros. Discovery split is both a culmination and a beginning. It marks the end of the convergence thesis that drove a generation of media M&A. And it marks the start of a new chapter in which streaming companies must prove they can stand alone — not just grow, but profit — without the safety net of legacy cash flows propping them up.
Zaslav has made his choice. Now he has to make it work.
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