Introduction
Warner Bros Discovery (WBD) has announced plans to split into two publicly traded companies, separating its streaming and studio operations from its declining cable television networks in a bid to enhance its competitiveness in the streaming landscape.Context
This decision marks a significant shift from the decades of media consolidation that culminated in major global conglomerates encompassing content creation, distribution, and telecommunications. The breakup will effectively reverse the merger between WarnerMedia and Discovery that took place in 2022. The restructuring aims to allow the streaming and studio division to flourish without being hampered by the struggles of the traditional networks unit.Developments
The newly formed streaming and studios company will include Warner Bros, DC Studios, and HBO Max, which are considered the prime assets of WBD's entertainment portfolio. The cable networks unit will retain properties like CNN, TNT Sports, and Bleacher Report, holding up to a 20% stake in the streaming-and-studios division.CEO David Zaslav will oversee the new streaming and studios entity, while CFO Gunnar Wiedenfels will lead the networks unit. The separation is set to be structured as a tax-free transaction, expected to be finalized by mid-2026. Zaslav emphasized that the decision was guided by an analysis of the evolving media landscape, indicating that maintaining distinct paths for global networks and streaming would be more beneficial.
Most of the company's substantial debt, totaling $38 billion as of March, will be associated with the global networks division. WBD has secured a $17.5 billion bridge loan from J.P. Morgan to aid in this restructuring.
In light of these developments, WBD's shareholders recently expressed dissatisfaction, voting against executive compensation packages at a recent annual meeting. The company's stock has seen fluctuations, including a nearly 3% drop following the announcement, which reversed an earlier 13% rise. Since the merger, WBD's stock has declined by nearly 60%, driven by losses in cable subscriptions, heightened competition in streaming, and concerns over the company’s direction.
Analysts, like Brian Wieser of Madison and Wall, suggest that the split may not adequately address WBD's fundamental weaknesses and could instead hinder both divisions in pursuing growth opportunities.