The battle between Paramount and Netflix over Warner Bros. Discovery is in the end about who will get to regulate HBO and the Warner film studio.
However the best way that battle will get settled goes to contain an uncommon aspect quest: CNN, TNT, the Meals Community, and a bunch of different cable networks WBD wants to get rid of. Particularly: What are all of these shrinking cable networks value?
Which leads us to a reasonably bizarre place: Paramount CEO David Ellison, who wants to buy all of WBD — together with its cable networks — is arguing that these cable networks aren’t value very a lot in any respect. And Netflix, which doesn’t want to buy those cable networks, is implicitly arguing that they are value rather more.
That is as a result of within the Netflix state of affairs, present WBD shareholders would undergo two transactions: First, WBD would spin out its cable networks into a brand new firm, and WBD buyers could be given shares in that new firm. Then Netflix would purchase the rest of WBD — HBO and the studio — for money and inventory.
Which implies Netflix, and WBD executives who’ve blessed the Netflix supply, will need buyers to suppose the cable networks are priceless. Ellison desires them to suppose the alternative.
Bloomberg places it nicely:
“The decrease you worth the cable property, the better benefit Paramount’s bid has. If shareholders imagine the cable operations are extra extremely valued, then Netflix’s bid, which assumes they are going to be spun off, means buyers get an general greater sum of cash.”
And here is the precise hole: Ellison says the spin-off is value about $1 per WBD share — or roughly $2.5 billion, primarily based on WBD’s present valuation. Unbiased analysts suppose it may be nearer to $4 per share — or roughly $10 billion. Paramount and Netflix reps declined to remark; WBD hasn’t responded to my request.
What are WBD’s cable networks really value?
So one aspect is describing a rounding error, particularly when it is part of a deal that could be worth $108 billion. The opposite is describing, kind of, a midsize media firm.
And sure, that is fairness worth, not enterprise worth — this already assumes the spin-off will get saddled with billions of WBD’s debt below the Netflix plan. However we’ll focus this dialog on the shares that in the end find yourself in a WBD investor’s brokerage account.
And if you happen to imagine David Ellison and Co., these buyers do not get a lot. As a result of CNN, Turner, and the entire networks previously owned by Discovery aren’t value a lot in any respect.
By means of comparability: In 2023, Bloomberg Intelligence estimated CNN alone was value $5 billion. And earlier this yr, a forensic accountant in a defamation trial stated CNN was value even much less in 2023 — a mere $2.3 billion. Now Ellison is saying CNN, plus “premier leisure, sports activities and information tv manufacturers all over the world,” as WBD describes the portfolio, is value $2.5 billion, all-in.
And sure, the cable network industry is a falling knife, which is why many big media companies that own cable networks are trying to ditch them. However are issues actually that unhealthy?
Perhaps. Perhaps, utilizing Ellison’s math, all of CNN plus a pile of different cable networks — which nonetheless generate money, thoughts you — are value about 16 Bari Weisses, primarily based on the reported $150 million he paid for her Free Press site.
Or possibly all of that’s value $10 billion — which implies it is nonetheless lower than 1% of Google. Which seems like a metaphor for your entire media trade in 2025: Even a roomful of well-known manufacturers barely registers in a world run by large software program firms.
Someplace in that $2.5 billion to $10 billion vary is the actual reply. However the headline is obvious: The networks that when held your entire cable bundle collectively are actually garage sale leftovers. Value one thing to somebody — however an entire lot lower than they was.
