Media giant Time Warner has taken another step in its efforts to separate its media content production businesses from its media distribution businesses, announcing today that it would be spinning off Time Warner Cable into a separate company. Time Warner expects the spinoff to be completed by the end of the current quarter; the separation will involve a pro-rata divident of all Time Warner Cable stock held by Time Warner itself, but the company did not offer any other details of the financing behind the separation.
Time Warner has been working toward spinning off its cable business since May of 2008; however, the split was only approved this month by the Federal Communications Commission. The FCC placed no conditions on the separation. At the time Time Warner initially announced plans to spin off its cable operations, the deal would have been worth almost $11 billion.
Time Warner has been running its cable distribution operation for almost 20 years, and at its inception the move was seen as a savvy bit of vertical integration, combining publishing, movie, and content-production power with a top notch content distribution partner. However, the marriage was never everything the businesses had hoped it would be, with both businesses citing significant differences in how capital needs to be managed to run their operations. Also, Time Warner came under increased regulatory scrutiny and public criticism for running both media production and distribution companies, which creates an inherent conflict of interest as the firm seems to promote its own properties and services…perhaps at the expense of competitors.
The new Time Warner will focus on being a “pure” media content firm, with assets including the Turner cable networks, Time Inc. publishing, and the Warner Bros. movie studios.