Warner Bros. Discovery (WBD) has been dealt a blow by S&P Global, which downgraded the company’s credit rating to BB+, or junk bond status, for the years 2025 and 2026. The downgrade reflects the continuing financial strain caused by the company’s struggling linear television business, even as it tries to shift focus to streaming and studio operations.
S&P Global maintained a “stable” outlook for the media giant, but warned that weak credit metrics and ongoing structural challenges justify the move to speculative grade. “We lowered our 2025 and 2026 forecast due to continued challenges in WBD’s linear television networks segment, which we forecast will offset growth at its studio and streaming segments,” S&P Global said in a statement.
The downgrade signals that despite growth in its direct-to-consumer offerings and film production, Warner Bros. Discovery’s legacy cable channels remain a drag on its overall financial health. Like many of its peers, the company is dealing with a double blow: declining ad revenue from traditional TV and the long-term shift by audiences toward cord-cutting and streaming.
There has also been ongoing speculation about a potential corporate split, where the company’s more promising assets like Warner Bros. Studios and Max (formerly HBO Max) would be separated from its traditional Discovery cable channels. While no official announcement has been made, S&P Global acknowledged the possibility, stating, “A separation would likely pressure ratings because it would weaken our view on the individual businesses, particularly the Global Linear Networks company, due to ongoing secular pressure in the linear television ecosystem.”
WBD has already made structural changes to prepare for such a move. In December 2024, the company announced the creation of a Global Linear TV division, setting it apart from its streaming and studio businesses. The full reorganization is expected to wrap up by mid-2025.
This restructuring mirrors similar moves by rivals in the media industry. Comcast, for example, is planning to spin off its lower-growth cable networks, focusing instead on its film, TV, and theme park divisions. These changes reflect a growing trend in the industry to separate high-growth digital content from traditional TV businesses that have seen declining revenues and viewership. Once considered reliable sources of cash, cable TV networks are now becoming liabilities. As more consumers opt for individual streaming services over bundled TV subscriptions, companies like WBD are finding it harder to justify holding onto legacy assets.
S&P Global analysts noted that despite efforts to cut costs and refocus the business, WBD will only be able to “modestly reduce leverage” or pay down its debt over the next two years through cash flow. In short, the company’s ability to dig out of its current financial situation is limited unless it makes more significant moves or sees major improvements in performance. The downgrade may increase borrowing costs for WBD and could affect investor confidence, especially as the company navigates a complicated transformation. WBD, formed from the 2022 merger of WarnerMedia and Discovery Inc., continues to feel the pressure of delivering profitability in a market that increasingly favors digital-first companies and pure-play streaming services.