Warner Bros. Discovery has entered into a multi-year distribution agreement with Comcast for all its domestic linear networks. From a financial viewpoint, this reduces long-term risk to affiliate fees. But how does this new agreement reduce the risk of a large decline in affiliate revenue in 2026, especially after the expiration of its National Basketball Association contract?
Jawad Hussain, Media & Entertainment Director at S&P Global Ratings, shared his thoughts on the matter.
First, he expects WBD’s leverage will remain elevated at 4.4x in 2024 and will only decline to 3.8x in 2025. This is above S&P Global Ratings’ 3.5x threshold for the rating.
Will there be asset sales in the coming months? “Although the company hasn’t specified assets it could sell to reduce leverage, we believe there are opportunities to explore asset sales or other balance sheet measures to accelerate leverage reduction toward the 3.5x threshold,” Hussain hypothesizes.
But, when evaluating the rating given to WBD, Hussain and his team chiefly assessed WBD’s ability to increase EBITDA at its direct-to-consumer (MAX) and Studios segment significantly more than the decline in its network segment, such that it can reduce leverage toward 3.5x by the end of 2025.
Thus, he said, “The new distribution agreement with Comcast and the extension with Charter reduce long-term risks to WBD’s affiliate fees, providing some stability amid ongoing industry challenges. The agreement reduces the risk of a sharp decline in affiliate revenue in 2026 and beyond, and helps mitigate pricing pressure on WBD’s linear networks, particularly TNT.”
Yet, despite these deals, “WBD’s networks face ongoing challenges from cord-cutting and audience declines,” S&P Global Ratings concludes.
