Warner Bros. Discovery runs one of the biggest entertainment businesses on the planet. It makes money in three ways: charging cable and satellite companies fees to carry its TV channels (networks like CNN, Food Network, TNT, and Discovery Channel), selling subscriptions to its streaming services HBO Max and discovery+, and licensing movies and TV shows that come out of its Warner Bros. film and television studios. Those three streams, subscriptions, advertising, and content sales, feed into each other constantly: the studios make the shows, the shows attract subscribers and viewers, and viewers attract advertisers. The diagram below traces where the money goes.
Warner Bros. Discovery: How Money Flows Through the Business
flowchart TD
A["Content Creation
(Films, TV, Games)"] --> B["Intellectual Property
(HBO, DC, Harry Potter)"]
B --> C["Distribution Channels
(Linear, Streaming, DTC)"]
C --> D["Subscriber & Viewer
Base 131.6M subs"]
D --> E["Three Revenue Streams
$37.3B total"]
E --> F["Distribution Revenue
$19.3B - 52%"]
E --> G["Advertising Revenue
$7.3B - 20%"]
E --> H["Content Revenue
$9.6B - 26%"]
F --> I["Operating Cash Flow
$4.3B"]
G --> I
H --> I
I --> J["Content Investment
(Feeds Node A)"]
J --> A
D --> G
D --> F
Five years of financial data tell a complicated story. When the WarnerMedia and Discovery merger closed in mid-2022, revenue jumped from $12.2 billion to $33.8 billion almost overnight because two large companies suddenly counted as one. By 2023 the combined company reported $41.3 billion in revenue. But since then, the numbers have moved in only one direction.
Total Revenue 2021 to 2025 ($ billions)
Revenue peaked in 2023 and has declined each year since. The 2022 jump reflects the merger closing, not organic growth.
Revenue fell to $39.3 billion in 2024 and then to $37.3 billion in 2025. The main culprit is the cable television business. Domestic linear subscribers fell 9% in 2025 alone. Advertising on those same cable channels dropped 14%, driven by a 25% drop in domestic audience. The cable segment still generates enormous cash, but it is shrinking fast and the company has acknowledged that declines are expected to continue.
What is Adjusted EBITDA?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Companies use it to show how much cash a business segment generates before accounting for big non-cash charges. Warner Bros. Discovery uses Adjusted EBITDA to measure how each of its three segments is performing. It strips out one-time items and lets you compare the streaming, studios, and cable divisions on a more equal footing.
Inside those declining headline numbers, two very different stories are playing out. The streaming business posted Adjusted EBITDA of $1.37 billion in 2025, more than double the $677 million it earned in 2024. The studios segment grew Adjusted EBITDA by 54% to $2.55 billion, helped by strong theatrical releases including A Minecraft Movie, Superman, and Sinners. Meanwhile, the cable network segment saw Adjusted EBITDA fall 21% to $6.41 billion. Cable still produces the most cash of any segment, but that engine is losing power every year.
$6.4B
Cable Networks Adjusted EBITDA 2025
$1.4B
Streaming Adjusted EBITDA 2025
Cable still generates far more cash than streaming, but cable fell 21% year-over-year while streaming more than doubled. The gap is closing from both sides.
The company has been using cable's cash to pay down an enormous debt pile. When the merger closed in 2022, net debt stood at $44.9 billion. By the end of 2025 it had been reduced to $27.9 billion. That is meaningful progress, but the debt is still very large relative to the size of the business, and paying interest consumed $2.085 billion in 2025 alone.
$27.9B
Net debt remaining at end of 2025, down from $44.9B when the merger closed in 2022
Free cash flow, the actual cash left over after running the business, tells a similar story. It peaked at $6.2 billion in 2023, then fell to $4.4 billion in 2024, and fell again to $3.1 billion in 2025. Some of that drop reflects real business pressure. Some reflects deliberate choices, including spending to launch HBO Max in new international markets like Germany, Italy, and the UK. The streaming segment added 14.7 million global subscribers in 2025 and finished the year at 131.6 million total. But the average amount each subscriber pays, called ARPU (Average Revenue Per User), fell 11% globally in 2025 because international subscribers pay much less than domestic ones and wholesale distribution deals carry lower rates.
Why ARPU matters for streaming businesses
ARPU tells you how much money one average subscriber brings in each period. A company can grow subscriber numbers while ARPU falls, meaning each new customer is worth less than the last. Warner Bros. Discovery's domestic ARPU was $10.79 in 2025 versus $3.80 internationally. Rapid international growth looks good on the subscriber scoreboard but puts downward pressure on average revenue per user.
Now add a layer of corporate upheaval on top of the financial pressures. In June 2025, the company announced plans to split into two separate publicly traded companies: one called Warner Bros. (streaming and studios) and one called Discovery Global (cable networks and discovery+). Then in late 2025 the board said it was also weighing a full sale. In January 2026 it signed a merger agreement with Netflix. Then in February 2026 it cancelled that Netflix deal and signed a new agreement to be acquired by PSKY for $31.00 per share in cash. To exit the Netflix deal, PSKY paid Netflix a $2.8 billion termination fee on the company's behalf.
2026
milestone
PSKY Merger Agreement Signed
On February 27, 2026, Warner Bros. Discovery agreed to be acquired by PSKY at $31.00 per share in cash, with Larry Ellison personally guaranteeing $45.72 billion of the merger consideration. The deal requires regulatory approval and shareholder approval and must close by June 4, 2027. If it falls apart, the company could owe PSKY a $3.0 billion termination fee plus up to $1.528 billion in reimbursements. If PSKY walks away, PSKY owes the company $7.0 billion.
The risks stacking up around this situation are specific and documented. The most immediate is deal failure. If the PSKY merger does not close by the deadline, the company owes up to $4.528 billion in fees and reimbursements while still carrying $27.9 billion in net debt. While the merger is pending, the company also cannot pursue other major transactions or financing without PSKY's approval, which could cause it to miss opportunities. On the business side, losing cable subscribers reduces the cash engine that is still funding debt repayment. And advertisers are moving money away from traditional television toward digital platforms, a trend the company says will continue to pressure advertising revenue. Distribution agreements with cable and satellite operators must be renegotiated periodically, and each renewal carries the risk of worse terms or lost carriage.
$4.5B
Maximum termination fees Warner Bros. Discovery could owe if the PSKY merger fails ($3.0B fee plus up to $1.528B in reimbursements)
The company booked a $2.959 billion gain in 2025 from buying back its own senior notes at a discount during the tender offers. That one-time accounting gain flattered net income in 2025 but does not represent ongoing business performance.
The Bet
Warner Bros. Discovery's streaming and studios businesses grow fast enough to replace the cash that the cable network business loses before the cable decline becomes severe enough to threaten the balance sheet. Streaming Adjusted EBITDA of $1.37 billion in 2025 is real progress, but it is still a fraction of the $6.41 billion the cable segment generated in the same year. If the cable decline accelerates faster than streaming profitability grows, or if the PSKY deal closes and removes this tension entirely, the outcome looks very different in each scenario. The whole model assumes time is on streaming's side.
Open question
Warner Bros. Discovery is simultaneously fighting a business model transition, paying down a massive debt load, watching its most profitable segment shrink, and waiting on a regulatory and shareholder approval process that determines whether it continues as an independent company at all. Does the PSKY merger close before the cable business deteriorates further, or does the deal collapse and leave the company navigating both a shrinking legacy business and a multi-billion-dollar termination fee at the same time?
Compiled · 10-K · FY2025
PSKY Merger Completion Risk
The company agreed to merge with PSKY but the deal requires approval from regulators and shareholders and must close by June 4, 2027. If the merger fails, the company could owe PSKY a $3.0 billion termination fee plus up to $1.528 billion in reimbursements, which would significantly harm financial condition and operations.
Business Restrictions During Merger Pending
While waiting for the PSKY merger to close, the company faces restrictions that prevent it from pursuing other business strategies, major financing deals, or strategic transactions without PSKY approval. These limitations could cause the company to miss important business opportunities that would benefit shareholders.
Streaming Service Subscriber Loss
HBO Max and discovery+ must compete with many other streaming services to attract and keep subscribers. If subscribers cancel their subscriptions or choose competitors instead, the company loses a major source of revenue and may struggle to replace those lost customers and grow the business.
Advertising Revenue Decline
The company depends heavily on advertising revenue, but advertisers are shifting spending away from traditional television toward streaming and digital platforms. If the company cannot adapt to this shift and compete for advertising dollars, advertising revenues could continue to fall significantly.
Content License Renewal Failures
The company's networks and streaming services depend on renewing licensing agreements with distributors like cable and satellite operators. If key agreements are not renewed or are renewed on worse terms, the company could lose major revenue sources and customer access.
10-K Item 1A · Risk Factors
