Linear TV Networks' Spinoffs Encounter 'Substantial Obstacles' According to S&P

Linear TV Networks' Spinoffs Encounter 'Substantial Obstacles' According to S&P

Media Companies Face Tough Decisions as Linear TV Business Declines

The linear TV industry is facing a steep decline, and media companies are grappling with the challenges of spinning off their traditional networks. According to a report from S&P Global Ratings, the U.S. linear TV business is expected to undergo an irreversible decline, with advertising revenue taking a significant hit.

One of the key issues facing media companies is the debt burden on spun-off linear networks. Warner Bros. Discovery (WBD), for example, is restructuring into two divisions, separating linear networks from studio and streaming operations. The linear TV entity inherits a heavy debt load of around $37 billion and faces declining revenues due to cord-cutting and shrinking linear advertising.

The secular decline of linear TV audiences and revenues is another challenge. Linear TV networks continue to experience persistent declines in viewership and advertising revenue fueled by consumer shifts to streaming. WBD’s Global Networks saw a 9% revenue drop and 25% profit decline in Q2 2025 alone. Maintaining profitability in this shrinking market is difficult.

Operational inefficiencies and lack of synergy are also concerns. Splitting integrated media operations often results in dis-synergies where spun-off businesses lose operational efficiencies, cross-promotion benefits, and scale economies. For instance, Comcast’s spinoff of its Versant cable business forces the remaining media segment to refocus and reposition strategically without its cable networks.

Strategic and market positioning challenges also loom. Spun-off linear networks must compete in a fragmented, less dynamic space with fewer growth prospects. Meanwhile, streaming divisions operate in competitive, high-investment environments. Balancing growth ambitions versus legacy stability is difficult.

Investor perception and valuation discount are also issues. Conglomerate discounts arise when combining high-growth streaming with declining linear TV makes the group less valuable than the sum of parts. Spinoffs aim to unlock value but face skepticism about prospects for the linear TV entity.

Regulatory and corporate governance complexity are additional hurdles. Mergers and spinoffs bring operational turmoil, potential job losses, and regulatory scrutiny which can exacerbate uncertainty and harm legacy business viability.

Despite these challenges, the decline of linear TV in the U.S. is expected to be a steady one, taking years to reach its final conclusion. The streaming segment is expected to grow in scale and profitability over time, providing a potential lifeline for media companies. However, the dependence on cash flow from linear TV networks is expected to decline over time as the streaming segment grows.

In the sports sector, sports-focused networks are expected to decline but may stabilize or modestly grow for some sports, particularly the National Football League. Audience ratings for the NFL's 2024 regular season declined by 2.2%.

Comcast has announced plans to spin off its linear TV networks, and other media companies may follow suit. However, spinning off TV networks is expected to face significant challenges amid secular declines and dis-synergies.

In conclusion, media companies dealing with linear TV spinoffs confront significant financial strain from debt, persistent revenue erosion due to cord-cutting, operational dis-synergies from breaking up integrated businesses, and uncertain market positioning and investor confidence, all amid a secular shift to streaming and digital consumption.

1. Media companies, dealing with linear TV spinoffs, are faced with financial strain due to the debt burden on spun-off networks.
2. For instance, Warner Bros. Discovery (WBD) inherits a heavy debt load of around $37 billion in its linear TV entity.
3. The secular decline of linear TV audiences and revenues is another challenge, as linear networks continue to experience persistent drops in viewership and advertising revenue.
4. Operational inefficiencies and lack of synergy are concerns, with spun-off businesses often losing operational efficiencies, cross-promotion benefits, and scale economies.
5. Investor perception and valuation discount are issues, with conglomerate discounts arising when combining high-growth streaming with declining linear TV.
6. Spinoffs aim to unlock value but face skepticism about prospects for the linear TV entity, making it difficult for these networks to maintain profitability in a fragmented, less dynamic space.

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