Warner Bros Discovery Eyes Split Of Streaming, Studio Businesses To Improve Stock Performance
Warner Bros Discovery, the media giant behind CNN and HBO, is exploring a potential separation of its digital streaming and studio businesses from its traditional TV networks in a bid to improve its stock performance, according to a report.
CEO David Zaslav is evaluating various strategic moves, including selling certain assets or creating a new entity that would include the Warner Bros movie studio and the Max streaming service, Financial Times reported Thursday.
This is to address the company's lagging stock price, which has plummeted nearly 27% this year, valuing the company at approximately $20.39 billion as of Wednesday, based on LSEG data.
Zaslav set off speculation that he might be looking to make a deal at last week's Allen & Company conference in Sun Valley.
The Financial Times, citing sources familiar with the discussions, reported that most of Warner Bros Discovery's substantial debt — around $39 billion, as of March 31 — could remain with the pay-TV networks if the separation occurs.
Warner Bros Discovery recently reported a larger-than-expected quarterly loss in May, driven by declining advertising revenue in its cable TV unit and ongoing challenges from last year's Hollywood strikes.
However, the streaming segment is showing resilience, adding 2 million subscribers and achieving a 72% increase in adjusted core profit.
Key backers of WBD include cable mogul John Malone and the Newhouse family, which controls Condé Nast. They have been closely monitoring the company's strategic direction.
In addition to internal discussions, sources indicated that Warner Bros Discovery representatives have informally approached advisors from rival media companies to gauge interest in potential mergers and acquisitions involving some of its assets.
Earlier this year, Warner Bros Discovery reportedly entertained the idea of combining with Comcast's NBCUniversal and Paramount.
Paramount has since entered an agreement to sell itself to David Ellison's Skydance studio. Both potential partners possess legacy TV assets and smaller-scale streaming services, which could have complemented Warner Bros Discovery's portfolio.
However, the proposed split is not without its challenges. Creating two distinct entities would necessitate complex negotiations over shared assets such as sports rights and other content currently distributed across both digital and traditional TV platforms.
Analysts from Bank of America have suggested that spinning off the direct-to-consumer and studio assets could potentially strain the company's debt but enhance its equity value, offering a mixed outlook on the potential restructuring.
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