Welcome back to What I’m Hearing, where the holiday weekend begins now. On Labor Day, I’ll be savoring summer on the Puck superyacht (yes, it’s called The Zaz), so no WIH email that day. Eriq and I will have a normal WIH+ on Tuesday, and I’m back to the regular Thurs-Mon schedule after that.

While you’re on your yacht this weekend (or a swan boat in Echo Park), check out John Ourand’s new sports media podcast The Varsity, named after his great Puck private email. His first guests are Peyton Manning and ESPN’s Jimmy Pitaro. Subscribe here and here.

Not a Puck member yet? Click here. Got a news tip or an idea for me? Just reply to this email or message me anonymously on Signal at 310-804-3198.

Let’s begin…

Why Yellowstone won’t end: WIH readers learned on Monday that Yellowstone, my favorite on- and offscreen drama, will not end with Season 5 and restart with a Yellowstone “sequel” series, as previously discussed. Instead, TV’s No.1 show will simply continue into Season 6, with fan favorites Cole Hauser and Kelly Reilly closing deals to return. What we didn’t say was why. After all, a reason to end one series and start another, à la Amazon’s Bosch and Bosch: Legacy, is to restart everyone’s deals, rather than pay the big raises associated with a sixth season of a major hit.

But Yellowstone is a bit different because it’s such a big hit and it’s losing its original star in Kevin Costner, so Hauser and Reilly were gonna get big money to return anyway. The other regulars will likely benefit from this shift, and the new cast—plans are to introduce several new characters—will start fresh. Of course, the real reason for the shift, like everything associated with Yellowstone, is that creator Taylor Sheridan decided that’s what he wants.

What a producer actually does: I did a little spit-take when I saw Marc Toberoff’s name among the credited producers on Beetlejuice Beetlejuice. No, the heroic/notorious copyright lawyer (depending on whether you work at a studio) isn’t exactly welcome on a big-budget movie set. But in 2019, he did successfully move to terminate the copyright to the original Beetlejuice script on behalf of the heirs of writer Michael McDowell, based on a federal law that allows authors to claw back rights 35 years after their work is first “published.” Toberoff, who is amassing perhaps the most extensive IMDb profile of any litigator, likely included his producing “services” as part of his fee for liberating the property and then licensing it back to Warners. Many producers have done less for their credit.

Box office over/under: Hollywood wrote off this weekend, so I will too.

Now another chapter in the continuing saga of David Zaslav and Warner Discovery…

So, what should an embattled and comically overpaid media C.E.O. do? On the heels of that BofA Securities report suggesting drastic measures were needed to save WBD, the Financial Times revealed in July that Zaslav was considering breaking up the company into separate entities—one built around the linear TV assets and a significant amount of WBD’s $39 billion in debt (bad); and the other a growing studios/streaming business (presumably good). But if that was a trial balloon, it didn’t float. Internally, many quickly tamped down those suggestions, saying they would tie the company’s hands on strategic decision-making and create a logistical nightmare. The whole “one Warner Bros. Discovery” argument, in Zaz-speak. And after a temporary stock jolt, the investor community agreed. “We think debtholder concerns and dis-synergies are limiting breakup enthusiasm for now,” Steven Cahall, the Wells Fargo analyst, wrote in a note this month. In a follow-up story, sources also told the FT that the split was considered only as a “nuclear option.”

So that’s where Zaslav is with WBD: Not quite bad enough to push the button on mutually assured destruction, and yet he’s aware that something must be done. The share price has ticked up from a low of just $6.71 earlier this month, but it closed today at $7.73, an embarrassment for Zaz and for a company that launched in 2022 at about three times that price. Warners insists that its financial situation is actually fine, and that its debt is an asset because it carries below-market interest rates. Okay… But the fact remains the company earns all of its profits from TV, and it needs both time and money if it hopes to transition to digital relatively intact. Even though it has the best TV brand (HBO), one of the great film and TV studios, and—as Zaz likes to repeat—40 percent of the world’s most valuable I.P.

It’s gotten to the point where the one persistent and yet mostly downplayed option seems, to me, increasingly likely: Warners is gonna need to sell some stuff. “Non-core asset sales could move ahead to support de-leveraging,” Cahall added. But what assets? There are no easy answers. After all, Jeff Bewkes, the former C.E.O. of Time Warner, spent a good chunk of the late 2000s and 2010s spinning off or selling the most easily dispensable parts of the company, like Time Warner Cable, AOL, and Time Inc. Then, in 2018, at what turned out to be the exact right time, he offloaded the rest for $100 billion (including debt) to the suckers at AT&T. It’s been chaos ever since.

So, what are WBD’s best “non-core” assets—valuable, but not so valuable that their absence would bring down the rest of the company? I spent the past week talking to bankers, analysts, and Warners insiders past and present. Here are some contenders, with what I understand to be the current thinking, and a sale likelihood of 1-5 on my patent-pending rating system of flying-away birdie emojis…

Still, the tax implications of a CNN sale would be very negative, and regulatory scrutiny would be heavy for any transaction. So sorry, Len Blavatnik and other foreign billionaires. Even Jeff Zucker, CNN’s former leader, who’s attached to the Emirati-backed RedBird IMI fund, would face U.S. skepticism similar to his aborted bid for The Telegraph in the U.K.

But most importantly, with the NBA leaving TNT, Zaslav kinda needs a “must-carry” news channel to keep the rest of his garbage—sorry, less compelling—cable networks distributed at significant monthly fees. Even if nobody really watches CNN now, bundle subscribers do like having it around for those three or four times a year when the news demands they tune in. Like, say, tonight, for Kamala Harris’s big interview. That’s valuable, and probably dispositive, unless the price is absolutely right.

What is clear internally, however, is that not all the European TV assets are essential to the overall health of the company. In particular, WBD’s Polish television operation, TVN Group, which came to Discovery in its 2018 acquisition of Scripps, is considered well-run, with a strong growth trajectory. That hasn’t gone unnoticed in the Euro TV community, which means Warners will need to evaluate offers. How much could it fetch? Maybe a couple billion bucks. Sure, take it.

A rumor circulated in recent days that Walmart was kicking the tires on the Food Network and HGTV. After all, the retail giant has twice considered launching a Prime Video competitor before doing a big partnership with Paramount+, and shows on those lifestyle networks are basically ads for products sold at the local superstore.

Turns out it was true: Walmart looked at Food and HGTV, but that happened a while ago, according to a well-placed source, and it went nowhere; no offer was made and there are currently no talks ongoing. Still, with Amazon leveraging Prime Video to help both its retail and advertising businesses, and with Chick-fil-A reportedly interested in its own content service, we’ve all heard crazier ideas than watching House Hunters on WalmartTV.

But much like with CNN, taking those two popular lifestyle networks out of the Warner fold would really weaken Zaslav’s position in carriage talks. Plus, the market doesn’t value these networks nearly as much as the cash flow they generate. And WBD sells ads across the entire portfolio, so separating out one or two nets to another buyer would be tough. It happens—Discovery sold something called the Great American Country network in 2021—but the price will have to be extra right.

Warners is already doing this. In 2021, the AT&T management sold the Warner Bros. Ranch in Burbank, just up the street from the main 100-acre studio headquarters, to Stockbridge Capital and Worthe Real Estate Group for $175 million. Warners got a leaseback on that property.

The big asset is Leavesden in the U.K., the converted airplane hangar facility where Warners and other studios now shoot many of their big movies. Warners owns Leavesden, and it’s become a huge business since Britain became so dominant as a production hub thanks to its generous tax incentives. To capitalize, Warners has increased its investment in building that business… which means it might be a decent time to sell. Who knows how long this U.K. production boom will last, and one banker I talked to thought Warner Discovery could get a couple billion for Leavesden today.

But again, it’s a great business, so there’s less incentive to divest. More likely, I think, is that WBD would bring in a financial partner to co-own the property or co-finance growth initiatives.

That’s why it’s hard to see Zaslav parting with Bugs and Wile E. Coyote, as some in the animation community have suggested after the whole Coyote vs. Acme controversy. The truth is that no division of Warners has really owned Looney Tunes, so it’s an under-exploited asset. But I’m told the film studio’s new animation head, Bill Damaschke, was hired with a plan for the property that will begin to roll out in 2028. That means it’s probably off-limits.

Still, that assessment could change soon, and the usual P.E. suitors or strategic games companies would be interested in a purchase, or—perhaps more palatable to Zaslav—a partnership. Just maybe not at the valuation WBD wants. LightShed media analyst Rich Greenfield thinks Warners should have sold the division two years ago, ahead of its blockbuster Harry Potter game. “While they can certainly still sell it today, the industry has cooled dramatically and its own fortunes have suffered with the recent loss on the Suicide Squad game,” he texted today.

After all, New Line, which first came to Warners in 1996 via its acquisition of Turner, now houses a bunch of franchises or potentially franchise-able assets: Final Destination, Mortal Kombat, Austin Powers, Elf, The Mask, The Conjuring, tons of horror and genre plays. As for library titles that consistently generate big revenue, you can’t do much better than The Notebook, Boogie Nights, Wedding Crashers, or some of the Nightmare on Elm Street titles. Tons of value and volume. Remember, Amazon paid $8.5 billion for MGM largely for its library—and the prospect of James Bond movies, if Barbara Broccoli ever gets around to making another one.

The thinking is that Warner Discovery could get a few billion for the New Line library, remake and sequel rights, and its current development infrastructure, and the company wouldn’t suffer much in the short term. After all, the argument goes, studio conglomerates trade less on their movies than on their television and direct-to-consumer businesses. The loss of library revenue would hurt, and it would be embarrassing to sell off some of the crown jewels, but WBD could generate a bunch of cash now without missing too much.

The problem, of course—other than Wall Street perhaps reacting negatively to the optics—is that New Line was fully absorbed into WB in 2008, responsible today for only two to three movies a year that are marketed and distributed by Warners. That means the New Line movies have been mixed and matched with Warners films in various output deals and licensing arrangements, and it would be a tough task to detangle them in a sale.

Plus, under the AT&T and then Warner Discovery regimes, the label has really been hollowed out from the Bob Shaye and Michael Lynne era—back when New Line was its own thing, Warners’ current co-head Mike De Luca was a young hotshot, and its offices on Robertson felt like another world from Burbank. Still… a sale could include a five- or ten- or 15-year distribution arrangement with Warners as a condition. The studio has had recent conversations for deals like that, I’m told, and there are tons of potential suitors for an A-level library like New Line’s.

That seems unlikely at this point, though one-off deals for particular franchises might be much more palatable. At least for now. After all, as one banker reminded me this week, Warner Bros. stayed alive during the Great Depression by methodically selling off about a quarter of its assets. We aren’t there yet, but a couple more bad quarters and these options might start to look a lot more attractive—or necessary.

Got a question, comment, complaint, or a 10-minute standing ovation at Venice? Email me at Matt@puck.news or call/text me at 310-804-3198.