The creation of Warner Bros. Discovery began with the corporate equivalent of sunshine and rainbows. In February 2021, David Zaslav, then the CEO of Discovery Inc., sent AT&T CEO John Stankey an amiable text. The message, which was adorned with both a golf and sunglasses emoji, sparked a series of talks (including secret meetings in a lower Manhattan townhouse) that led to the creation of WBD in 2022.

Just three years later, the sunshine and golf has been replaced by cloudy skies, as the company prepares to split itself up. One current employee who works in what will become Gunnar Wiedenfels’ global networks company expressed frustration at the news, lamenting that by the time this deal closes next year, the company will have spent an entire decade shuffling ownership from one entity to the next, from AT&T’s deal for Time Warner, to the Discovery deal, to now — all while the stock price and cash flow have steadily declined as the cable iceberg melts, and with layoffs and cuts never ending but executive pay rising.

Superficially, at least, WBD’s maneuver bears a striking resemblance to Comcast’s decision to spin off its cable TV channels into Versant, but it is in the details where the two plans diverge. The biggest difference may be reflected in the very first question that Wall Street analysts asked Zaslav on a conference call on the morning of June 9: the debt.

Wiedenfels’ global networks company will hold a “majority” of WBD’s more than $30 billion in debt, utilizing its cash-flow-rich but slowly melting assets to service that debt. Versant, by contrast, is expected to have minimal debt, so that it can be an opportunistic acquirer (Versant CEO Mark Lazarus has told fellow media execs that he wants his company to be aggressive and expects to be a buyer rather than a seller).

“If you have a portfolio of what’s called linear channels, one of the things you’re thinking about is, ‘Do they have successors in the streaming world?’ And if so, how do I get from here to there?” says Integrated Media CEO Jon Miller, who adds that a high debt load could also make the company less attractive as an acquisition target. “Not every linear channel is going to make it to the streaming world and thrive in the streaming world. So you’re going to have to determine what you believe can thrive in the streaming world and make some choices and investments. If you have a lot of debt on top of that, your ability to invest is more limited. And so by necessity, you have to make even fewer choices in terms of what you invest in going forward.”

At Zaslav’s studios and HBO business, meanwhile, a solid balance sheet and creative portfolio are offset by losing the cash flow from cable TV. While NBCUniversal holds on to cash-flow-rich businesses like NBC and the Universal theme parks in its spinout, WBD is essentially divesting itself of its cash-flow machine in the name of creating a growth business.

Comcast noted that Versant will have about $7 billion in cash flow, while what remains of NBCU will have nearly $40 billion in revenue. While WBD has not yet broken down its financials post-transaction, the linear networks comprise a majority of its revenue, giving it a very different economic profile.

Zaslav’s business, however, could make for a ripe acquisition target, as Wolfe Research’s Peter Supino notes. As for Wiedenfels’ side of things, “Global Networks will not be positioned to die, in our view, but will still shrink materially,” Morningstar analyst Matthew Dolgin dryly wrote June 9. “Some attractive assets, such as U.S. sports rights, the CNN and Discovery streaming properties, and digital assets like Bleacher Report, can mitigate the linear television networks’ decline.”

And while Versant has a tight bundle of seven cable TV channels and some digital brands like Fandango, the new WBD networks business will have a larger collection of channels, perhaps giving it more runway to operate but also giving it less ability to focus. And while NBCU spent years trimming down its roster of cable channels to only those it thought mattered, WBD has tried to prop up its channels in the service of survival, with a pivot at TruTV into a sports channel just the latest example.

“NBC, they’ve been really good and active the past couple of years skinny-ing down their program offerings so we don’t have to re-up with networks that are of low value,” says Keith Bowen, president of news, programming and business services for the cable company Optimum.

And Lazarus, at Versant, has made it a priority to get employees hyped up about being at what he frames as a well-capitalized startup rather than a holding company for a dying industry. In addition to acquiring companies, Lazarus has talked openly about acquiring new sports rights, about building out a programming team to develop and acquire entertainment, about staffing up in news at MSNBC and CNBC, and about a new temporary midtown Manhattan headquarters (located in the building that used to be the home of The New York Times) that he is dubbing “summer camp.”

While the messaging may change, WBD’s initial public pitch remained focused on efficiency, rather than opportunity.

But there is opportunity in that efficiency, as Bank of America analyst Jessica Reif Ehrlich wrote shortly after the split was announced.

“With Streaming & Studios separated as a standalone public company unburdened by the substantial debt burden, we expect significant investor interest (both public and private) in these highly valuable assets,” she wrote. “Similarly, as a standalone entity, Global Networks has optionality including asset sales or the potential to become a ‘roll up’ for other similar assets, likely at attractive valuations and subsequently extract several cost synergies (corporate, advertising sales, etc.) to extend the runway of FCF these assets would yield to service debt over the next several years.”

One company that will excite investors, and another that will extract cost synergies to service debt, with any deal a ways away. “While we view the split of Networks and Streaming & Studios as just the first step to unlock value, a second step may require patience,” Supino writes.

The two SpinCos also tell a tale about the future. The first media mogul to broach the idea of spinning off their linear channels was Disney CEO Bob Iger, shortly after rejoining the company in 2022. Disney ultimately opted not to do so, but one wonders whether the company reconsiders in light of what rivals are pursuing. Similar questions are sure to arise as Paramount Global sits in limbo waiting for the Skydance deal to  close.

The past 30 years of the entertainment business were funded by cable TV cash, but it seems that era is finally coming to an end. The tastemakers gave way to the number crunchers, and now the number crunchers are sending the TV channels off to the vultures.

Or, as mogul and dealmaker Barry Diller told THR in a May interview: “We’ve gone from a town to a spreadsheet.” The propagators of those spreadsheets are running the show, and have decided that ripping up the businesses they helped forge is the pathway to success.

This story appeared in the June 11 issue of The Hollywood Reporter magazine. Click here to subscribe.