Warner Bros. Discovery Credit Rating Drops Dramatically As Company Prepares To Split Up Its Operations
Just when Warner Bros. seemed on the right track with A Minecraft Movie and Sinners becoming box office hits, the whole company was dealt another blow that, honestly, many saw coming. The S&P has reduced WB Discovery’s credit rating to “junk status.”
According to Variety, S&P Global Ratings lowered WBD’s rating to a BB+ and “lowered its forecast for 2025 and ’26” because of the shaky ground the company’s linear television is on. That aspect of their business faces “‘continued revenue and cash flow declines at its linear TV operations,’ which will offset growth at the company’s streaming and studio segments.”
The S&P doesn’t foresee WBD’s earnings exceeding $9 billion in the next three years, before interest, taxes, depreciation, and amortization (or EBITDA). This means they will have a higher debt-to-equity ratio at 4.3x, which is “significantly higher” than S&P’s “3.5x leverage threshold for an investment-grade rating.”
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It’s added a BB+ credit rating is “one step below” the lowest rating and the “highest speculative-grade by market participants.” This dip could adversely affect WBD’s ability to “raise or refinance debt.” S&P reported in their downgrade, “We do not expect WBD to materially accelerate deleveraging through asset sales, but to instead prioritize investment in its growth businesses, which will extend the deleveraging path.”
While there is speculation of a massive companywide sale, and rumors that’s what David Zaslav and Discovery, Inc., acquired Warner for in the first place, to prep the portfolio, there’s no sign of one yet, at least not overtly. However, we are seeing maneuvers concerning WBD’s declining TV business.
Reuters reported earlier this month that WBD is looking to sell or spin off its cable channels and focus on the growing streaming market. The latter avenue has been a boon for them as they’ve experienced a gain of 5.3 million Max subscribers in the first quarter of 2025, which is beyond their estimates (3.1 million).
Conversely, cable revenue fell 7%, and although Zaslav still sees value in the studios (so long as they are kept away from the TV side of things), studio revenue is down 18% due to the failure of Mickey 17, especially. Revenue was “$2.31 billion, missing estimates of $2.73 billion, according to Visible Alpha,” says Reuters.
In all, the company missed the mark on its quarterly expectations to start the year. To add insult to this injury, their streaming business, though prospering, still has an awkward outlier to address. Some of you may recall a few years back (2023 to be exact), WBD announced they had an interest in entering the free, ad-supported streaming game, or FAST for short.
The result of this endeavor was supposed to be WBTV, a service which, as Cord Cutter News puts it, analysts thought would rival Pluto TV and Tubi. Ideally, it would draw from “Warner Bros. films, Discovery’s unscripted hits, and Scripps networks’ lifestyle programming” to drum up ad revenue while promoting its big brother Max, similar to what Pluto does for Paramount Plus.
However, that was two years ago, and WBD still hasn’t shared a battle plan or launch date for WBTV. Moreover, they seem tacitly content with dumping their old programming from HBO and elsewhere in their catalog onto Tubi, Roku, and Freevee. Happy with what Cord Cutter calls “content syndication,” WBD might not need to buy the cow, which raises questions that perhaps echo internally about the need for WBTV.
Everybody else is already doing FAST WB and doing it better, so why bother? David Zaslav, and the Board of WBD, have to be asking themselves that question a lot lately after careful considerations and robust discussions – one would hope.
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