The combat between Paramount and Netflix over Warner Bros. Discovery is in the end about who will get to regulate HBO and the Warner film studio.
But the way in which that combat will get settled goes to contain an uncommon aspect quest: NCS, TNT, the Food Network, and a bunch of different cable networks WBD wants to get rid of. Specifically: 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 way more.
That’s 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 traders 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 means Netflix, and WBD executives who’ve blessed the Netflix provide, will need traders to suppose the cable networks are priceless. Ellison desires them to suppose the alternative.
Bloomberg places it effectively:
“The lower you value the cable assets, the greater advantage Paramount’s bid has. If shareholders believe the cable operations are more highly valued, then Netflix’s bid, which assumes they will be spun off, means investors get an overall bigger sum of money.”
And here is the precise hole: Ellison says the spin-off is value about $1 per WBD share — or roughly $2.5 billion, based mostly on WBD’s present valuation. Independent 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 truly value?
So one aspect is describing a rounding error, particularly when it is part of a deal that could be worth $108 billion. The different 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. But we will focus this dialog on the shares that in the end find yourself in a WBD investor’s brokerage account.
And if you happen to consider David Ellison and Co., these traders don’t get a lot. Because NCS, Turner, and the entire networks previously owned by Discovery aren’t value a lot in any respect.
By approach of comparability: In 2023, Bloomberg Intelligence estimated NCS alone was value $5 billion. And earlier this yr, a forensic accountant in a defamation trial mentioned NCS was value even much less in 2023 — a mere $2.3 billion. Now Ellison is saying NCS, plus “premier entertainment, sports and news television brands around 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. But are issues actually that dangerous?
Maybe. Maybe, utilizing Ellison’s math, all of NCS plus a pile of different cable networks — which nonetheless generate money, thoughts you — are value about 16 Bari Weisses, based mostly on the reported $150 million he paid for her Free Press site.
Or possibly all of that’s value $10 billion — which suggests it is nonetheless lower than 1% of Google. Which appears like a metaphor for the complete media trade in 2025: Even a roomful of well-known manufacturers barely registers in a world run by big software program firms.
Somewhere in that $2.5 billion to $10 billion vary is the actual reply. But the headline is evident: The networks that when held the complete cable bundle collectively at the moment are garage sale leftovers. Worth one thing to somebody — however an entire lot lower than they was once.