Warner Bros. Discovery: Carriage Deal With Charter Is Promising and Should Be an Industry Blueprint

Warner Bros. Discovery and Charter Communications announced an early renewal of the affiliate agreement that allows Charter to offer Warner’s family of television networks in Charter’s pay-TV cable packages. The deal is most notable because Charter will include access to the ad-supported Max streaming service, including HBO programming, in its standard television subscriptions for no additional customer fee. This structure largely mirrors the deals Charter struck with Disney and Paramount to similarly include streaming services in a standard pay-TV package, but this is the first to also include what had previously been an add-on premium network in HBO. This type of evolution in the pay-TV industry supports our view that traditional media companies that historically relied on linear networks maintain value and have been overly punished in the market. We are maintaining our $17 fair value estimate and no-moat rating for WBD.