Monday morning, news broke that Warner Bros. Discovery (WBD) would be splitting into two companies: one that houses its TV and movie studio along with its Max (soon to be HBO Max) streaming service and another that houses its legacy assets, including the TNT Sports family of cable networks.
It was an expected move. Last December, the company restructured internally along those lines. In April, CNBC reported that the company had hired bankers to explore its split options. And now, it is finally happening.
WBD is the second major media company to opt for a split or spin. Earlier this year, Comcast announced it would launch Versant, a spinoff entity that will include most of the NBCUniversal cable portfolio, including USA, MSNBC, CNBC, Golf Channel, and others.
The move obviously has massive implications for sports fans. TNT Sports owns numerous prevalent live sports rights in the United States, and its split from WBD will impact how and where fans can access those games. Similarly to Versant, WBD’s new entity, which is temporarily being called Global Networks, will have to navigate its future without direct access to a broadcast network or a streaming service.
However, unlike Versant, which is primarily acquiring the scraps of NBC’s larger live sports portfolio, Global Networks is acquiring the entire enchilada from WBD. That means the:
- NCAA Men’s Basketball Tournament (through 2032)
- MLB (through 2028)
- NHL (through 2028)
- College Football Playoff (through 2028)
- NASCAR (through 2031)
- French Open (through 2034)
For individuals who access TNT properties through a traditional pay-TV bundle, not much will change. The question becomes how these networks will be distributed digitally as more consumers move to streaming and cable goes the way of the dodo. In the interim, TNT Sports properties will continue to stream through Max, per the company’s investor call discussing the move on Monday. But that will be a temporary solution. At some point, TNT Sports will need to find a streaming partner willing to license its content for its platform. And given TNT’s live sports portfolio, that may prove more challenging than it seems.
Currently, the list of sports rights appears favorable on paper. College Football Playoff inventory, which will now include a semifinal game, is must-have content. So is March Madness and, to a lesser extent, parts of the NHL and MLB postseasons. The issue is that, other than March Madness, all of those rights expire in three years. How can TNT Sports, absent consolidation with a major streaming service or broadcast network, afford to compete for those expensive rights? Especially when much of WBD’s current debt load is being saddled onto the new venture.
WBD’s entire U.S.-based sports division is being put on an island. For now, the networks will survive off of existing carriage agreements. They’ll save some money by not having to pay for NBA rights, though the league’s absence will put a sizeable dent in its advertising business.
However, this isn’t a question about how TNT will survive for the next few years. This is a question about how TNT will survive for the next 10 years or if that’s even possible.
One thing looks certain: it will be imperative for the new entity to find a company (or companies) willing to pay to license its live sports content. Otherwise, TNT will struggle to renew any meaningful rights. And in three years’ time, if TNT loses the CFP, MLB, and NHL all in the same calendar year, what league or conference would willingly sign a new agreement with the network without the reach of a broadcast network or the growing userbase of a streamer? Doing so would be hopping on a sinking ship.
As it stands, TNT will likely already have to pay a premium for sports rights compared to other potential bidders, given its limited reach, which isn’t exactly an attractive move considering the company’s massive debt load.
It isn’t easy to see how TNT can dig itself out of this hole. The question becomes, how can the network leverage its currently valuable sports portfolio while it still can? Does a prominent streaming platform like Amazon, Apple, or Netflix have any interest? Do those companies think TNT’s portfolio can drive subscriptions?
If you listened to WBD CEO David Zaslav during Monday’s call, those rights didn’t do much to drive Max subscriptions. Could that be different on another platform? Maybe.
Could a tie-up with Versant make sense? Perhaps, though, Versant CEO Mark Lazarus has already made clear that he doesn’t want to acquire any debt-ridden companies. However, perhaps there are alternative arrangements to be considered outside of an outright acquisition.
Then there are wildcards. Maybe Paramount, under new ownership, wants to make a splash in live sports? Does Fox see value in the TNT Sports portfolio as it prepares to launch Fox One? There are several possibilities, but finding an arrangement that proves mutually beneficial to both TNT and the other party becomes significantly more challenging.
Ultimately, what we’re witnessing is the late stages of a cable network’s declining business. And while the outlook may seem grim, there is still much that needs to unfold. It’s not time to dig TNT’s grave just yet, but we’re approaching life support. These next three years will be critical for the network’s long-term survival, so much as “survival” is even a possibility for cable networks a decade from now.
