Warner Bros Discovery scales back music sale as bids fall short

Warner Bros Discovery has scaled back plans to cash in on its film soundtracks with a more than billion-dollar music sale after receiving offers that were lower than it had wanted, according to three people familiar with the matter.

Chief executive David Zaslav had been looking to help cut Warner’s debt by capitalising on the hot market for music copyrights. The company has held informal talks with potential buyers over the past few months to gauge what valuation they could achieve.

Zaslav’s advisers had initially hoped to receive as much as $2bn for the music catalogue, which includes soundtracks to Batman and other films, according to two people familiar with the matter. However bids came in lower, at around $1.2bn to $1.3bn, the people said.

Warner is now reconsidering and may sell only a piece of the catalogue or abandon the deal entirely, said people familiar with the matter. No final decision has been made, these people said.

The setback comes as Zaslav has spent the past year scouring the sprawling Hollywood group — which spans HBO, the Warner Bros movie studio and CNN — to find places to trim debt. The push has been successful: the group has repaid $7bn in debt since the closing of the $40bn merger of WarnerMedia with Discovery a year ago. Gross debt stood at $49.5bn in the most recent quarter.

The Warner Bros movie studio created a music division in the 1950s. In 2004 parent company Time Warner sold the music division, but the group retained its copyrights to a trove of songs.

Given the importance of the intellectual property, Warner has asked that any sale give it control over how certain soundtracks are used and requested other stipulations. The conditions damped the value of the catalogue for potential buyers, said three people familiar with the matter.

Dealmaking in general has slowed dramatically in recent months as rising interest rates and economic uncertainty have weighed on the confidence of buyers and sellers. Other recent prospective media deals have not been consummated due to tepid prices. 101 Studios, the production company behind the hit television series Yellowstone, had recently explored a sale of the company but has hesitated because valuations have come down from the highs seen a year or two ago, according to people familiar with the matter.

After losing more than half of its value last year, Warner Bros Discovery stock has recovered by more than 50 per cent this year as investors bet the worst is over in terms of losses and restructuring costs associated with the merger.

“We took bold decisive action over the past 10 months and the bulk of our restructuring is behind us,” Zaslav said on an earnings call in February.

Chief financial officer Gunnar Wiedenfels in January defended the austerity drive. “We shaved off a lot of the excess last year, and I think that’s something that everyone else in the industry is going to go through,” he told an investor conference.