Warner Bros. Discovery Reportedly Considering Max, Studio Spinoff and Asset Sales to Right Financial Ship
The company has been talking with consultants about the best ways to increase shareholder value.
Are big changes on the way for Warner Bros. Discovery? It’s entirely possible; according to new details from the Financial Times, WBD has begun investigating the possibility of asset sales, as well as the idea of spinning off its streaming platform Max with its movie studio to form a new company while its TV channels stay put, siloing the more reliable parts of the business from its debt-ridden counterparts. Multiple options are on the table, as the company looks into the best ways to increase its value for shareholders.
Key Details
- WBD’s stock price has fallen around 70% since the merger of WarnerMedia and Discovery in 2022.
- The company has explored partnerships with Paramount and Comcast, and is part of the the Venu Sports joint venture as well.
- Wall Street analyst Jessica Reif Erlich told clients in a note earlier this week that she thinks WBD must do something to help shareholders.
The discussions about asset sales and other big changes at WBD are fairly preliminary, and no investment banks have been hired to start seeking out deals. However, the company is having conversations with advisors to see what its best potential strategies for boosting shareholder value might be.
The Financial Times cites sources who say that a breakup of the company appears to be the strongest option if changes are eventually made. One possibility is splitting the company’s movie studio and streaming service Max into a separate company, leaving its TV channels and $39 billion in debt to stand on their own. This could allow WBD’s revenue centers of the future to supercharge their earning power.
WBD shareholders are looking for any sign that the company is working to improve its financial position. Its stock price has fallen by around 70% since the merger of WarnerMedia and Discovery in 2022, and although its direct-to-consumer segment showed a modest profit in 2023, analysts are still worried about its huge debt load and continuing declines in revenue from its linear channels.
What Partnerships Has WBD Already Explored?
Streaming joint ventures are another avenue WBD has considered to try and boost revenue and alleviate debt. The company explored a deal with Paramount earlier this year, and has also had discussions with Comcast about a combination in the past. WBD is participating in one joint venture, as it will launch Venu Sports with Disney and Fox later this year, assuming regulators don’t stand in the way.
Discussions are all well and good, but some analysts think that the time for talk has passed. Bank of America Global Research’s Jessica Reif Erlich wrote in a note to clients this week that she is begging the company to do something to help increase the return for shareholders. The after-effects of the COVID-19 pandemic and the 2023 Hollywood strikes are hamstringing the company, and it must do something to bounce back.
The company could decide to simply continue on as it has been, with no major changes. WBD has been able to boost its free cash flow and begin paying down debt, but the slow-and-steady approach isn’t as appealing as solutions that could bring more instant gratification to shareholders. That’s why chatter is now increasing about what moves the company could make in the near future, and why observers shouldn’t be surprised if WBD tries to sell part of the company or spin off Max into a new entity.
Max
Max is a subscription video streaming service that gives access to the full HBO library, along with exclusive Max Originals. There are hubs for content from TLC, HGTV, Food Network, Discovery, TCM, Cartoon Network, Travel Channel, ID, and more. Watch hit series like “The Last of Us,” “House of the Dragon,” “Succession,” “Curb Your Enthusiasm,” and more. Thanks to the B/R Sports add-on, users can watch NBA, MLB, NHL, March Madness, and NASCAR events.