Warner Bros. Discovery runs one of the largest entertainment businesses in the world. It makes money in three main ways: charging cable and satellite companies fees to carry its TV channels, collecting monthly subscription fees from people who watch HBO Max or discovery+, and earning revenue from movies, TV shows, and games it creates and licenses to others. The company owns famous brands across every corner of entertainment, from HBO and CNN to Warner Bros. Pictures, DC Studios, Food Network, and TNT Sports. Those three income streams feed into each other in ways that are worth understanding, and the diagram below traces where the money goes.
How Warner Bros. Discovery Makes Money
flowchart TD
A["Content Production
Studios Segment"] --> B["Distribution Rights
and Licensing"]
A --> C["Streaming Services
HBO Max discovery+
131.6M subscribers"]
B -->|"Content Revenue
$9.6B"| D["Revenue Streams
$37.3B total"]
C -->|"Distribution Revenue
$19.3B"| D
E["Linear Networks
TNT Food Network CNN
140M monthly viewers"] -->|"Advertising Revenue
$7.3B"| D
C -->|"Advertising Revenue
Ad-supported tiers"| D
F["Cable and Satellite
Distributors"] -->|"Subscription Fees"| C
F -->|"Carriage Fees"| E
D -->|"Operating Cash Flow
$4.3B"| G["Content Investment
and Expansion"]
G --> A
G --> C
H["Licensed IP
Harry Potter DC Games
of Thrones"]
H --> A
H --> E
Five years of financial data tell a story with a clear shape. Revenue jumped from $12.2 billion in 2021 to $41.3 billion in 2023, almost entirely because the company merged with WarnerMedia in 2022 and suddenly became much bigger overnight. That was not organic growth. Since that peak, revenue has declined every year, falling to $39.3 billion in 2024 and then to $37.3 billion in 2025. The direction is down, not up.
Total Revenue 2021 to 2025 ($ billions)
The 2022 spike reflects the WarnerMedia merger, not organic growth. Revenue has declined for two straight years since the 2023 peak.
The debt picture is more encouraging. The company carried $44.9 billion in net debt at the end of 2022, right after the merger loaded it up with obligations. Since then, management has worked steadily to pay that down, reaching $27.9 billion in net debt by the end of 2025. That is real progress, though the number is still very large. Free cash flow, meaning the cash left over after running the business and paying for content, has also been heading the wrong direction recently. It peaked at $6.2 billion in 2023 and fell to $3.1 billion in 2025.
$44.9B
Net Debt (end of 2022)
$27.9B
Net Debt (end of 2025)
The company has reduced its debt burden meaningfully over three years, but $27.9 billion in net debt still represents a heavy load for a business with declining revenue.
Looking inside the business, there are two very different stories happening at the same time. Streaming, which includes HBO Max and discovery+, added 14.7 million subscribers in 2025 and ended the year at 131.6 million total. That segment's adjusted profit more than doubled, from $677 million in 2024 to $1.37 billion in 2025. Studios also had a strong year, with adjusted profit rising 54% to $2.545 billion, helped by big theatrical hits including A Minecraft Movie and Sinners. But both of those gains were offset by the Global Linear Networks segment, which covers traditional cable TV channels. That segment's adjusted profit fell 21% in just one year, from $8.149 billion in 2024 to $6.412 billion in 2025, as cable subscribers and advertising kept shrinking.
What is Adjusted EBITDA?
Companies often report a number called Adjusted EBITDA alongside their official profit figures. It stands for earnings before interest, taxes, depreciation, and amortization, with certain one-time costs removed. It is a rough measure of how much cash a business generates from its operations before big accounting charges and unusual items are counted. Warner Bros. Discovery uses it as the main way to measure how each of its three segments is performing.
Cable TV is still generating the most profit of the three segments today, but it is shrinking fast. Domestic linear TV subscribers fell 9% in 2025. Domestic advertising audiences on those networks fell 25% in a single year. The company itself states that declines in linear subscribers are expected to continue. The segment that currently produces the most cash is the one with the clearest expiration date.
25%
Decline in domestic cable TV advertising audiences in 2025 alone
2026
milestone
The PSKY Merger Agreement
In February 2026, Warner Bros. Discovery terminated a previously agreed merger with Netflix and instead entered a new merger agreement with PSKY. Under the terms, PSKY would acquire all of Warner Bros. Discovery for $31.00 per share in cash, with a guarantee backed by Larry Ellison covering $45.72 billion of the payment. The deal requires regulatory approval and shareholder approval, and must close by June 4, 2027, or either side can walk away. If Warner Bros. Discovery terminates the agreement under certain conditions, it must pay PSKY a $3 billion fee plus reimburse other costs including the $2.8 billion termination fee already paid to Netflix.
The PSKY merger agreement changes everything about what risks matter most right now. The company already paid $2.8 billion to exit the Netflix deal. If the PSKY deal also falls apart, Warner Bros. Discovery owes another $3 billion in termination fees on top of reimbursing other costs. That combination would hit the company's cash position at exactly the moment when the cable TV business is generating less cash every year.
What is a merger termination fee?
When two companies agree to merge, they usually include a penalty that one side must pay if it backs out. This is called a termination fee. It is designed to make both sides serious about completing the deal. The bigger the fee, the more it hurts to walk away.
Beyond the merger risk, the company faces several other documented threats. Sports rights are extremely expensive and there is no guarantee the company earns back what it spends through advertising and subscriptions. The company holds major sports licenses including NBA games, the College Football Playoff, and European soccer, all of which require enormous ongoing payments. Competitors including Netflix, Amazon, and Apple have large financial resources and are also chasing sports rights. Meanwhile, streaming services like HBO Max compete in a crowded market where subscribers cancel easily and signing up new ones requires heavy spending on marketing and content.
131.6M
Total HBO Max and discovery+ subscribers as of December 31, 2025
The company's global average revenue per streaming subscriber fell 11% in 2025, from $7.76 to $6.92. More subscribers does not automatically mean more money per subscriber, especially as growth comes from cheaper international markets and lower-priced wholesale deals.
There is also a structural tension baked into the business that has not yet been resolved. Cable TV channels still generate $6.4 billion in adjusted profit annually, even after a rough year. Streaming generates $1.37 billion. The profitable part of the business is the dying part. The growing part is not yet big enough to replace what is being lost. Whether that gap closes in time is the central question for this company.
The Bet
HBO Max and the Studios business grow fast enough, and become profitable enough, to fill the gap left by the collapse of cable TV revenue before that collapse gets too deep to manage. The streaming segment's adjusted profit of $1.37 billion would need to multiply several times over to replace the $6.4 billion that cable currently contributes, and cable is shrinking by hundreds of millions of dollars per year. The Studios segment helps, but its results swing based on which films hit and which miss. Everything assumes the transition happens quickly enough that the company still has the financial strength to fund it.
Open question
Warner Bros. Discovery has genuinely valuable assets, a growing streaming service, and a merger agreement that would deliver $31.00 per share in cash if it closes. But the cable TV business that currently pays most of the bills is deteriorating faster than streaming is growing, the company still carries nearly $28 billion in net debt, and it has already paid $2.8 billion to exit one deal that did not complete. Does the PSKY merger close before the cable TV decline erodes the company's financial foundation, or does the transition from old media to new media take longer than the business can afford?
Compiled · 10-K · FY2025
PSKY Merger Completion Risk
Warner Bros. Discovery agreed to merge with PSKY, but the deal requires approval from regulators and shareholders and must close by June 4, 2027, or either company can walk away. If the deal fails, the company must pay PSKY a $3 billion termination fee plus reimburse other costs, which would severely strain cash available for operations and growth.
Advertising Revenue Decline
Traditional TV advertising is declining as viewers shift to streaming, and competing streaming services now offer cheaper ad slots. The company's ability to charge higher ad rates is limited, and advertisers may not pay based on viewership that cannot be fully measured, especially in certain countries with data privacy restrictions.
Sports Rights Investment Risk
The company spent billions on sports licenses (like NBA games) but faces increasing competition driving costs up. There is no guarantee the company will recoup these investments through advertising and subscription revenue, and losing major sports licenses when they renew could eliminate a key tool for attracting and retaining subscribers.
Linear TV Viewership Decline and Content Underperformance
Audiences continue to abandon traditional cable TV for streaming and other entertainment, reducing ad revenue and subscriber fees. The company must consistently produce hit content to attract viewers, but content performance is unpredictable, and failed films or shows result in lost investment and lower revenue.
Streaming Subscriber Acquisition and Retention
HBO Max and discovery+ operate in a crowded market with many competitors offering similar services. If subscribers cancel or don't renew, the company must spend heavily to attract replacements, and there is no certainty that bundling partnerships or marketing will drive enough growth to offset losses or become profitable.
10-K Item 1A · Risk Factors
