Warner Bros. Discovery has been downgraded to BB+, or junk bond standing, for 2025 and 2026 by S&P International over linear TV weak spot because the Hollywood studio continues to pivot to the streaming area.
The scores agency continued its outlook for WBD as secure, however pointed to weak credit score metrics general to elucidate its bond score markdown to speculative grade. “We lowered our 2025 and 2026 forecast on account of continued challenges in WBD’s linear tv networks phase, which we forecast will offset progress at its studio and streaming segments,” S&P International mentioned in a press release.
WBD, like its business rivals, has been below strain from Wall Avenue amid industrywide challenges, together with promoting softness and cord-cutting, as traders search for a return on an costly transition from legacy linear TV networks to the digital streaming world.
The opportunity of WBD doing a serious break up of the corporate — with WB studios being doubtlessly paired with a rebranded HBO Max and the Discovery linear cable channels being spun off right into a separate firm – hasn’t precisely cheered the scores agency.
S&P International has not factored into its scores downgrade any potential break up of the corporate as a result of one hasn’t been formally introduced. However the scores agency added “a separation would probably strain scores as a result of it might weaken our view on the person companies, notably the International Linear Networks firm, on account of ongoing secular strain within the linear tv ecosystem.”
WBD has already begun to reorganize the corporate with an eye fixed to a doable spinoff of its legacy TV property. In Dec. 2024, the studio mentioned it had reworked its company construction into a world linear TV division, separate from its streaming and studios division.
WBD added it had begun the early steps main towards the brand new company reorganization, with a completion set for mid-2025. A doable break up of the corporate at WBD would observe rival Comcast unveiling a plan to spin off its much less profitable cable networks away from its movie and TV studio leisure and parks companies.
Whereas the cable enterprise was a money driver for studios, the TV channels these days have turn out to be a drag on earnings, and traders have dinged corporations which have been weighed down by channels tied to bundles which have quick fallen out of out of favor with shoppers who’ve spent as a substitute on particular person streaming providers.
Consequently, S&P International analysts mentioned they count on WBD to solely “modestly cut back leverage,” or its borrowings, this yr and subsequent by producing money circulate.