Warner Bros. Discovery: Split announced

The US media group Warner Bros. Discovery (WBD) announced on Monday that it will split the company into two listed companies. The streaming business and the studios will be separated from the stagnating cable television division. According to WBD, this decision is aimed at maximizing the potential of both divisions. The planned split is intended to "unlock value for shareholders and create opportunities for the two new businesses to thrive," Warner Bros. Discovery said in a statement. Like other entertainment companies, Warner Bros. Discovery is struggling with declining ratings and revenue at its cable networks as consumers abandon pay-TV subscriptions in favor of streaming services.

The move announced on Monday reverses the 2022 merger of WarnerMedia and Discovery. At that time, AT&T sold its WarnerMedia division to Discovery for 43 billion US dollars. The merger was intended to give the companies a stronger foothold in the streaming market.

As part of the current restructuring, the Streaming & Studios division will consist of Warner Bros. Television, Warner Bros. Motion Picture Group, DC Studios, HBO and HBO Max as well as their film and television libraries, according to the announcement. The news agency Reuters speaks of the "crown jewels of Warner Bros. Discovery's entertainment library". The TV channels in the entertainment, sports and news sectors, including CNN and TNT Sports in the USA, Discovery, European TV channels and digital products such as the streaming service Discovery+ and Bleacher Report will be transferred to Global Networks. The US tech portal TechCrunch writes that it is "notable" that Discovery+ will not be allocated to the streaming segment, "suggesting that WBD may not prioritize it as much as HBO Max."

Focus and strategic flexibility

"By operating as two distinct and optimized companies going forward, we are giving these iconic brands the focus and strategic flexibility they need to compete most effectively in today's changing media landscape," Warner Bros. Discovery President and CEO David Zaslav is quoted as saying in the WBD release. Zaslav will lead the streaming and studio unit following the split, while CFO Gunnar Wiedenfels will move to head Global Networks. "This separation will strengthen the respective companies by allowing them to leverage their strengths and specific financial profiles. This will also allow each company to pursue key investment opportunities and increase shareholder value," said Wiedenfels. Global Networks will focus on "finding further innovative ways to collaborate with distribution partners to create value for both linear and streaming viewers worldwide".

The demerger will be structured as a tax-free transaction and is expected to be completed by mid-2026. According to Reuters, the majority of the Group's debt will be transferred to Global Networks. According to the news agency, Warner Bros. Discovery had gross debt of 38 billion US dollars in March. According to WBD, Global Networks will hold a stake of up to 20 percent in Streaming & Studios after the split, which the company intends to sell on a tax-efficient basis in order to reduce debt.

Further deals in the media sector expected

The split comes at a time when Warner Bros. Discovery is trying to reposition its streaming service HBO Max as a provider of premium content. Initially, the company had aimed to boost its appeal with a mix of HBO dramas and Discovery lifestyle content, as Reuters writes. In March, HBO Max had around 122 million subscribers; the number is expected to grow to over 150 million subscribers by the end of 2026. However, HBO Max would still be far behind market leader Netflix.

Some analysts believe that the restructuring of Warner Bros. Discovery could set the stage for further deals in the media and entertainment sector and referred to the plans of US cable network operator Comcast. The latter plans to spin off most of its cable networks, including MSNBC and CNBC. "The outlook for the cable network business in general is pretty bad," Jeff Wlodarczak of the consulting firm Pivotal Research Group told Reuters. He assumes "that there will be consolidation there".

(akn)