Warner Bros. Discovery mulls music-library sale to ease debt - FT

As Warner Bros. Discovery (NASDAQ:WBD) wrestles with deleveraging from a debt-heavy transaction that created the company, it's looking at selling its music library for a potential $1B, the Financial Times reported.

That comes as CEO David Zaslav has been implementing rapid cuts in order to find ways to slim down the debt pile.

Film studio Warner Bros. created a music unit in the 1950s, and though its parent Time Warner sold off that music division in 2004, the Warner group retained copyrights to a library of songs (such as soundtracks to films including the Batman series).

And it's that library that might be valued at $1B-plus in a hot market for music copyrights that is spurring prominent artists to consider selling their rights. In late 2021 Bruce Springsteen agreed to a reported $500M sale of his masters and publishing, and Bob Dylan sold his song catalog to Universal Music and sold his recorded music to Sony for $200M.

The process is in the early stages, and any deal would contain stipulations over the use of certain soundtracks, according to the report.

Comments

[jhoskam]

I do not understand why corporate is in NYC, except that they are close to on and off Broardway plays. Why not let everyone enjoy these. If making movies is too expensive give us plays to watch.

[Jimmy54]

I find your article very misleading and incomplete. The entire music division is up for sale not just the publishing rights. The price tag is an expected between 1 Billion to 3.5 Billion. The value of the music is priced at 1 Billion with rest of the value being the different entities that make up the music division. If they get 2 Billion or more the sale is a grand slam for them.

[netx]

@Jimmy54 Why grand-slam--because it may equal this 1/4's losses?

[LONGBULL+]

As far as any further cost savings opportunities now that the content writeoffs are complete, Wiedenfels reiterated Zaslav’s previous assertions that no “strategic asset sales” are in store. “Beyond that, there is opportunity” for more trims, he said. “There’s a real estate portfolio where there may be better structures for us to generate liquidity. We’re in the process of analyzing those less-visible, non-core parts of the portfolio

[wwloon32]

@LONGBULL+ I, for one, won't substitute write off with cost trimmings, nor confused others by stating it is different (this time and next).

[Simeroth1]

1 billion not near exciting enough to get interested

[wwloon32]

@Simeroth1 The interest is what get interested in this transaction.

[Kaiser24]

Disney shareholders wish they had Zaslav at the helm. He is making all the right moves to turn around the balance sheet and the bottom line.
He is also leaning into the “elevated content” narrative that makes Warner special. Quality over quantity is a winning strategy. I bet he sells to Universal at $40 in 3 years time.

[wwloon32]

@Kaiser24 Netflix shareholders too, much prefer if Zaslav at helm in both WBD and Disney. He is making the competition too easy for Netflix.

[Kaiser24]

@wwloon32 it’s true, but that’s not a bad thing. It’s not winner takes all. Having rational actors in charge rather than “race to the bottom” simpletons benefits the whole industry.

[wwloon32]

@Kaiser24 The irrationality of racing to the bottom-line has not gone unnoticed.

With the incompetence of Zaslav, Netflix shareholders would have a good time.

[roberto_00]

If they don't need it, I'm glad they sell it. Makes me laugh reading that for for many 1B is nothing... It's actually almost their whole debt for 2023. Everybody seems to – willingly, I guess – forget that they don't need to have ZERO debt nor pay 50B by tomorrow: they have 1.22B to pay whithin 2023 and 4.2B by the end of 2024. Seems very manageble to me. I would also like them to consider selling minority stakes they have in Europe, such as 49% of Boing (a cartoon channel in Italy and Spain), 32% of Canal+ Poland, which I don't see as strategic... and even the former at&t regional sports channels in the US, which again I don't see as strategic.

As for the deal with Amazon in France, I don't understand how it can be bad. I actually see the renewed relationship with Amazon as very positive. I wouldn't be surprised if "some day" they'd merge their video assets. Prime Video has broad shoulders, but isn't very relevant... content wise I mean.

[KingOfPower]

@roberto_00 Not that it matters. Small stuff.

But they have already paid of 1B of the 2023 debt.

d18rn0p25nwr6d.cloudfront.net/...

[roberto_00]

@KingOfPower even better! :D

[roberto_00]

In less than a year They have paid more than 7B. Which I think is AMAZING!

[Jimmy54]

There is definitely more here then meets the eye. Selling the music removes employees from that area to be reallocated to other divisions during the tight labor market without increasing salaries. Pay is definitely the biggest cost of any company. They also get to layoff/fire unneeded employees.

The other point of paying off debt, while it may not seem like a significant amount to the total debt, it does help! Kinda like having a garage sale and using the proceeds to help pay off the credit cards. Every little bit helps.

[FaultyR0M]

@Jimmy54 there's no employees as it is not a studio they are selling. They want to sell copyrights.

[Simeroth1]

@Jimmy54 selling grandmas silver to cover some of your credit card debt is short term and cuts cash flow

[Jimmy54]

@FaultyR0M So nobody works curating the music? Nobody over sees the copyright laws, nobody works, nobody does anything for the music division completely unbelievable.
here is the link to the music division, well at least we know they have web team www.watertower-music.com/...

[wwloon32]

That's how trouble starts, huh?

[PennyPlanSupporter]

They have to shove the furniture into the fireplace to keep warm.

[Michael Sozek]

Too many peeps don’t know what they owne

[Oxbow11]

Amazing to me that people below have issues with this- 1 billion for batman soundtracks?!? Yes please- sell the heck out if that- keep this run going!

[nerd_rage]

Is this another desperation sign? Yhey just did a deal with Amazon to handle their content in France.

variety.com/...

Why wouldn't they want HBO Max to be a distributor in all major markets? That seems to me like either a desperation move to get some cash, fast, or an admission that they're not going to be able to hack being a distributor at all. Maybe this all ends up with HBO as a tile within Amazon Prime and Warners Discovery just funnels content to them to distribute globally.

They may still have plans to launch HBO Max in France but this undercuts that effort by allowing Amazon to siphon off customers in advance. Why should they make the switch later?

[Land Man21]

@nerd_rage

"While ‘Warner Pass’ is a unique offering for the French market, it doesn’t impact the company’s ambition to launch the combined streaming product in France as part of their European roll out expected for 2024."

[Caywyn]

@nerd_rage The France thing is basically just like putting HBO on Amazon Prime Channels, plus some of Discovery’s European assets.

It doesn’t stop them from launching HBO Max in France and I don’t really see it any different than selling HBO through Prime Channels.

As for the music catalog, they can’t bring in that much revenue off of it seeing as it’s all soundtracks. I don’t really see a reason to keep it if someone else wants to pay good money for it.

On the other hand, $1B doesn’t move the needle much, one could make an argument against selling anything if it’s not going to make a big impact.

[wwloon32]

@nerd_rage because they thought bundling is good but even Amazon themselves don't want them.

They been in Amazon bad book for sometime.

[netx]

Desperation--1B sale of music/$1 incr HBOMAX to top of streaming/sale of European shows--in worsening ad market/increasing theatrical content spend/streaming intense competition/huge albatross debt--with Market saying smart as major brokerages recommend to unload their shares.

[Caywyn]

@netx How is it desperation? This doesn’t seem like an asset that provides much value to Warner, they can’t make much revenue off it. So why not sell it?

[netx]

@Caywyn Fair enough, but last 1/4 Current/Quick Assets scraping floor-sounds like cash-strapped maneuver in bad ad mrkt/high restructuring costs.

[deadhead213]

What’s next!? Selling fixtures and office furniture?

[ElonForPresident]

@deadhead213 actually Gunnar (cfo) said last week they are looking in to unused real estate to sell

[deadhead213]

@ElonForPresident makes sense. The Street loves winners, who do whatever it takes. $WBD is textbook, perfect when it comes to shaving the fat off the bone. David Z, is doing an outstanding job.

[wwloon32]

@deadhead213 Selling is not a problem. Burning them is.

Just like how they burned those movie films.

[Joe Lorusso SFA Inc]

About 50 billion debt, maybe 1 billion sale. Drop in the ocean indeed. Sell everything you can and hopefully there is a bucket for equity.

[TheMikeBeirne]

@Joe Lorusso SFA Inc the debt is really close to under 40B already. In fact I'll be surprised if they arent closer to 38 and a lot of those cuts are carrying thru in ongoing FCF...

[Michael Sozek]

@TheMikeBeirne it’s around 49Billion as of now I believe
Find out when earnings report February 5th or so

[wwloon32]

@TheMikeBeirne I always wonder how does they conjure up 50b liabilities whereas the tax liabilities are not included?

When it comes to tax liabilities, tax are not included in the mind of most commenters.

When it comes to tax credit, they are always included into the "benefit" of the taxes.

I wonder where in the mind does it add up?

[Code Talker Market Analysis]

Keep selling assets. Get it ready for sale.

[Dividend Ambassador]

God, $1 billion? What a teeny tiny drip in their debt ocean.

[Idkmuch]

@killiondt smells desperate to me

[Plan Man]

@Idkmuch if they can keep usage rights could be a nice boost without weakening ip

[Plan Man]

@killiondt 2%.

If you compare to a home mortgage of 500K getting 2%, 10K, ahead would same quite a bit in the long run.

[Michael Sozek]

Smart

[Idkmuch]

@Michael Sozek smart would have been doing this when it was a better sellers market , this is just he has no choice time

[Caywyn]

@Idkmuch Why do they have no choice at this time? There’s very little debt due in 2023. Also, when would have been the “right” time to sell? They’ve only owned these assets for about 8 months. Are you suggesting that the market for a back catalog of soundtracks has substantially tanked over the last 8 months?