Warner Bros. Forecasts Declining Sales, Profit for Cable Unit

(Bloomberg) — Warner Bros. Discovery Inc. predicts a decline in revenue and profits over the next five years from its cable networks, which the company plans to spin off before selling its broadcast and studio businesses to Netflix Inc.

Total revenue for Warner Bros. channels, which include CNN, TNT and Cartoon Network, will fall from $16.9 billion this year to $15.6 billion in 2030, the company said Tuesday in a filing on the Netflix deal. Earnings before interest, taxes, depreciation and amortization will drop from $4.8 billion to $3.2 billion.

Cable projections leave out the Turner Classic Movies channel but include the Discovery streaming service. They include corporate spending but exclude stock-based compensation.

Cable TV networks are losing subscribers and advertisers as viewers turn to streaming options. Warner Bros.’ value’ The cable business is hotly debated as the company weighs acquisition offers from both Netflix and Paramount Skydance Corp.

Paramount had offered to buy all of Warner Bros. for $30 per share, arguing that the company’s cable networks were essentially worthless given the debt involved in the spinoff, making its offer superior to Netflix’s offer.

On Tuesday, Warner Bros. In an amended, all-cash deal with Netflix, it offered to pay $27.75 per share for its streaming and studio business.

Warner Bros.’ Advisers provided a range of valuations for the cable networks, ranging from as low as 72 cents per share to $6.86 per share after the separation, according to the filing. Warner Bros. argues that the additional positive impact from the eventual split of its cable assets makes the Netflix deal superior.

Warner Bros. projects growth for CNN; revenue is expected to reach $2.2 billion in 2030, from $1.8 billion in 2026. This is largely due to new direct-to-consumer subscription products like CNN All Access. According to two estimates, profits will remain steady at $600 million annually or rise to $700 million.

Unlike the cable industry, Warner Bros. projects major growth in its broadcast and studio units over the next five years; revenue will grow from $24.3 billion this year to $34.1 billion in 2030. EBITDA will increase from $3.5 billion to $8.4 billion after corporate expenses but before stock-based compensation.

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