Just as Comcast/NBCUniversal prepares to launch its cable spinoff, Versant, Warner Bros. Discovery (WBD) appears to be eyeing the same fate for its cable assets.
According to multiple recent reports, WBD is gearing up to split its business into two. One side will keep the movie studio and the Max streaming platform, the other will house declining cable assets like TNT, TBS, and truTV.
That’s all fine and good. After all, at the very least WBD would be shedding itself from the cable networks that stymie the growth prospects of its other forward-looking businesses. But reality may be tough sledding for those channels after they leave the WBD mothership.
Puck’s Julia Alexander brilliantly broke down the hurdles these networks would face after a split from WBD, and one path that could possibly lead to some modest success.
At the crux of the issue is sports rights. As everyone knows, WBD is in its last season airing live NBA games. That loss spurred the company to gobble up as many ancillary sports rights as possible to stay relevant enough that pay TV distributors had to keep them on their platforms. The French Open. Mountain West football. A handful of NASCAR races.
None of those will make up for the loss of the NBA. But that’s not the goal. They simply have to be enough.
But what happens to these properties — and WBD’s marquee sports inventory like MLB, NHL, and March Madness — when the company splits? That could pose a significant reach problem, according to Alexander.
As it stands, any sports property that airs on TNT, TBS, or truTV is also available to the 56 million people that subscribe to Max. But when those channels eventually breakout of WBD, they’ll be on their own. Viewers that relied on Max to watch WBD sports properties will be left in the dust.
Versant is taking a unique approach to this issue. With its sports properties no longer available on Peacock, the new company is leaving it to the individual cable networks to determine their own streaming futures. That means Golf Channel could end up streaming in one place, while USA ends up in another.
The end result, at least in the short-term, is more fragmentation.
That’ll be a key challenge to both cable spinoffs. As live sports rights float their businesses, securing digital distribution on established platforms will be key to staying in business with leagues beyond their current contracts.
One solution? Puck’s Alexander suggests that a future WBD spinoff should lean into its niche sports strategy. Spinoff companies like Versant, or whatever WBD decides to name its new entity, won’t have the purchasing power to compete for Tier 1 sports rights like the NFL, NBA, or major college football. They can, however, dominate a niche sport if they play their cards right.
Versant will test this model with golf. The company will own Golf Channel, but also the tee time booking business GolfNow and the golf membership business GolfPass. Owning “the entire chain” as Alexander puts it, might be the key to growth for these new companies.
And she thinks WBD’s spinoff is well positioned to take over tennis like Versant has done for golf.
“Perhaps WBD’s cable nets should acquire the Tennis Channel and its D.T.C. product to put the company at the center of all things tennis, amplifying its French Open right,” she writes. “Maybe the company can crib from [Versant CEO Mark] Lazarus’s golf strategy and buy an app like iOnCourt, which helps users schedule matches and creates a local leaderboard, engaging tennis fans as players as well as spectators. Since WBD would own the entire chain, they could monetize each step of the journey.”
No matter what, these cable spinoffs will be on the struggle bus with regard to keeping their companies viable. But investing in businesses outside of linear television might be the best path towards survival.