This is something that was forecast for a while.

Last year, major media companies suffered large write downs as a result of their legacy assets being worth significantly less than what was shown on their balance sheets.

Basically, these properties are worth a fraction of what the industry had previously thought. It shows the substantial decline in legacy television. Much of this is due to cord cutting, the process of moving away from the traditional cable or satellite system.

Streaming is now taking over, providing new entrants such as Google with fertile ground to accumulate market share.

Warner Bros. Discovery is reacting to this reality by splitting into two companies.

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The Death of Legacy Television

Legacy television is dead.

This is being further emphasized by the announcement by Warner Bros. Discovery. The company announced it will split into two separate units.

According to APNews the entities will be as follows:

HBO, and HBO Max, as well as Warner Bros. Television, Warner Bros. Motion Picture Group, DC Studios, will become part of the streaming and studios company, Warner Bros. said Monday.

The cable company will include CNN, TNT Sports in the U.S., and Discovery, top free-to-air channels across Europe, and digital products such as the Discovery+ streaming service and Bleacher Report.

This means all the value is being pushed into the first entity with declining assets going into the second.

It is evident by who is heading up each company.

Warner Bros. Discovery CEO David Zaslav will become serve as CEO of the company that for right now is called Streaming & Studios. Gunnar Wiedenfels, chief financial officer of Warner Bros. Discovery, will be CEO of the cable-focused entity, for now known as Global Networks.

Of course Zaslav is beading up the Streaming and Studios. That is where the value resides. The CFO is getting a promotion, a parachute to babysit a dying animal.

Of course, it will not all be smooth sailing for Zaslav. There are tremendous headwinds for Hollywood, with the studios in jeopardy of seeing technology really dig into its profitability.

A Decade in the Making

This is something that started more than a decade ago.

Companies like Disney dove head first into streaming, something that was mastered by Netflix. Since that company was bringing in huge profits, the traditional studios thought they could do the same.

In looking at the streaming market share, it appears the investments made by these companies (absent Netflix) is a waste. Disney sunk over $80 billion when the acquisition of Fox is factored in, a move that was designed to provide more content to the streaming service.

This does not mean streaming was a waste. Google, though YouTube, has also mastered this. It is the leading streaming service and it isn't even close. A fair portion of the content on that platform costs the company nothing since it is user generated.

In the meantime, movie studios are still trying to find their way.