Warner Bros. Discovery’s $43 Billion Warning For Indian Media Investors

David Zaslav just delivered a masterclass in corporate failure by announcing the breakup of Warner Bros. Discovery—the same company he spent $43 billion assembling just three years ago as his "rendezvous with destiny."

That destiny turned out to be financial purgatory. Warner Bros. Discovery shares have cratered nearly 60% since the 2022 merger, incinerating tens of billions in shareholder wealth while Zaslav collected $141 million in compensation for the privilege of presiding over this spectacular value destruction. Now the CEO wants to split his streaming assets from declining cable networks, conveniently sticking the latter with most of the $34 billion debt hangover.

Warner's retreat highlights a fundamental problem. Legacy media companies worldwide lack the capital to compete effectively in both traditional and digital markets simultaneously. Zaslav bet that combining Discovery's reality programming with HBO's prestige content would create a streaming powerhouse to rival Netflix. Instead, the acquisition's debt burden starved the company of resources needed for the technology investments and customer acquisition that define streaming success.

Indian media companies face similar constraints, yet many persist with similarly flawed convergence strategies that promise everything and deliver little.

Consider Zee Entertainment Enterprises, which trades at just 1.1 times book value compared with historical averages above two. Despite launching the Zee5 streaming platform and pursuing expensive content strategies, the company burns cash without building sustainable competitive advantages. Unlike Netflix, which spreads technology costs across more than 260 million global subscribers, Zee5's smaller user base means higher per-subscriber costs and insufficient data to power effective recommendation algorithms.

Sun TV’s 2024-25 results showed profit declined 11.5% while operating margins compressed to 45.6% from 54.4% a year earlier. Despite its strong regional market position, advertising revenue is migrating to digital platforms while cord-cutting erodes subscription income. Sun's streaming effort, Sun NXT, lacks the content breadth and technological sophistication to compete with global platforms while diverting resources from profitable traditional operations.

Both companies illustrate the scale economics that make streaming so punishing for traditional players. Success requires network effects—more users generate better data, which improves recommendations and attracts even more users. Without sufficient scale, companies like Zee and Sun, even as they invest heavily in content, lack the underlying technology capabilities that separate winners from losers: sophisticated algorithms, seamless streaming across devices, and effective customer acquisition.

The resource gap is stark. Netflix has invested more than ₹30 billion in Indian content alone. It exceeds the annual revenue of most domestic competitors, even while maintaining global libraries that dwarf local offerings. When technology giants can hire away local talent while maintaining superior recommendation engines, traditional broadcasters lose their few remaining advantages.

Convergence proving to be a fantasy, Indian media companies have two viable paths forward.

Companies with strong regional positions like Sun TV might maximise cash generation from traditional operations while making only minimal streaming investments. This means optimising advertising revenue through programmatic partnerships, cutting content costs through strategic acquisitions, and returning cash to shareholders rather than funding expensive digital platforms doomed to fail.

Alternatively, well-capitalised companies might abandon traditional operations entirely and pursue digital-first strategies. This requires selling linear television assets to fund massive technology investments, hiring Silicon Valley-calibre talent for algorithm development, and accepting years of losses while building subscriber scale. Yet, few Indian companies have the capital or leadership bandwidth for such ground-up transformation.

The middle path—trying to excel in both markets—has proven catastrophic, as Warner's experience demonstrates. Zee's discount valuation and Sun's margin compression show investors understand this strategic paralysis.

For retail investors attracted to beaten-down media stocks, Warner's retreat offers important perspective. Low valuations often reflect genuine business model deterioration rather than temporary pessimism. The streaming wars aren't coming to India. Netflix, Amazon and Disney are already here, acquiring local talent and content while maintaining technological superiority that traditional broadcasters cannot match.

Indian media companies have a narrow window to choose focused strategies before suffering Warner's fate. Current-age entertainment demands technology, scale and capital that most media companies simply lack. Companies that acknowledge this reality may survive; those clinging to convergence fantasies will follow Warner Bros. Discovery into managed decline.