Memo #19: John Malone's End-game?

Zaznomics, Malone, and the split of WarnerBrothersDiscovery; also, Cathie Math.

The Kingmaker: John Malone

It was only a week or so ago when WarnerBrothersDiscovery (WBD) saw its credit rating downgraded by S&P Global; one of the reasons was they didn’t believe the long-heralded split of the company into two. This didn’t make sense to us for a few reasons — Zaz and Co. had already said they wanted to split the company in two (i.e. the good stuff — streaming, studios, and the Warner Brothers library, and the rest — CNN and linear cable). Since the merger of Discovery and Warner Brothers, Zaz has been on one mission and one mission only — paying down debt. He’s done that!

(I’m interested in one thing and one thing only…paying down debt.)

The company started with a whopping $55bn of debt and now has $34bn (nobody’s pretending that isn’t still a big figure, but it’s been a remarkable improvement nonetheless).

The problem with owning such a varied conglomerate, as many of WBD’s friends know (Paramount, Comcast), is that you end up with one division that does really well — i.e. streaming, while you end up weighed down by the historical linear assets that are essentially a decaying bond (see: Paramount, CBS). This is sort of a fun irony to think about — not that long ago those linear assets were the doyen of every network — those linear assets are what made Bill Paley at CBS one of America’s most influential and wealthy citizens, while it’s what built the fortunes of figures like Ted Turner and Shari’s dad, Sumner, at Paramount.