Hollywood studios are realizing how television properties are worthless. We are seeing this spread throughout the industry. Comcast was the first to come out with this.
Disney CEO has talked about doing the same with the channels its own.
We now have Warner Bros taking steps to dump the television channels into another entity.
Warner Bros Spinning Out Television Channels
This is another sign of a dying industry. When that happens, companies look to squeeze the last dollars out of the assets before they are in the grave.
Cord cutting means there are less cable subscribers as evidenced by the last decade. Warner Bros is realizing how much this is hindering the progress of the overall company.
For this reason, they are making the move to separate the entities.
Warners on Thursday said it was reorganizing its corporate structure into a global linear TV division, separate from from its streaming and studios division. The new corporate structure aims to bolster its “strategic flexibility and create potential opportunities to unlock additional shareholder value.” The studio said it will begin the early steps towards the new corporate reorganization immediately and expects to complete the initiative by mid-2025.
In a sign of just how embattled the pay TV business is, the move by WBD follows rival Comcast unveiling a plan to spin off its less lucrative cable networks away from its film and TV studio entertainment and parks businesses. Disney CEO Bob Iger has also talked publicly about his studio’s legacy TV networks, including ABC, “may not be core” to the company.
This is no surprise as we see the death of traditional television. The relevance of these channels is much less than it was a couple decades ago.
It was highlighted during the Presidential election in the United States. The ratings for the news channels were down a significant amount as compared to the last two elections (2016 and 2020).
Media Fragmentation
This is all part of an ongoing trend that started around two decades ago.
YouTube is the tOP streaming platform, with more hours viewed than any of the major streaming services, including Netflix.
The latter is ranked second, a company that is outside the sphere of traditional Hollywood.
We are basically looking at an eyeball problem. As people spend more time looking at phones, tablets, and laptops, this is devastation to the cable subscription model.
This is what these traditional Hollywood companies are dealing with.
The most likely outcome is a fire sale. Warner Bros will spin out the broadcast assets (along with the debt) and the dump it on the open market. private equity will step in, picking the assets up for a song. They will continue to pillage the assets for whatever they can, resulting in a ROI on their money.
Since the Baby Boomers still number in the tens of millions, there will be 10-15 years to milk these properties, The numbers will get worse with each passing year but, if the price is low enough, profit potential exists.
From a financial perspective, this might make sense. As for the industry, it will be the end of an era.