Warner Bros Discovery (WBD) plans to split itself into two public companies by next year — a streaming and studio company inclusive of its film properties and streaming service HBO Max, and a global networks company that includes CNN, TNT Sports and Discovery.
CEO David Zaslav will lead the former, while chief financial officer Gunnar Wiedenfels will become CEO of the latter.
It is not yet clear how the two will share valuable licensing agreements, including investments in sports rights.
The move comes just three years after WarnerMedia merged with Discovery to become Warner Bros Discovery. As part of the deal, the conglomerate was saddled with debt, much of which was inherited from WarnerMedia.
Zaslav’s efforts in the following years have broadly been centred around reducing debt to a more manageable figure while focusing on high-growth aspects of the business — namely streaming.
Under Zaslav, HBO Max was rebranded to Max, then reverted back to HBO Max, and the new streaming and studios business will be tasked with continuing to scale the service as it enters new markets, including the UK next year.
In its first earnings post-merger, the company reported it had gross debt of $53bn, with a net leverage of 5.0x. This is calculated by dividing net debt by the sum of the most recent four quarters of adjusted Ebitda (its preferred measure of profit).
In WBD’s Q1 2025 earnings, gross debt had shrunk to $38bn with a net leverage of 3.8x — thanks in part to cost-cutting measures and improved revenue from HBO Max price hikes.
The company’s stated goal has been to reduce its net leverage to between 2.5x and 3.0x.
By splitting the business, much of the debt will sit within its network assets, freeing the streaming business up to make further investments, although the same could be true of the global networks company should it prioritise cost efficiencies.
The network properties, while arguably lacking growth potential, have still provided a steady stream of cash generation.
To aid in the transition, the global networks business will hold up to a 20% retained stake in the streaming and studio company — something that it will “plan to monetise in a tax-efficient manner to enhance the de-leveraging of its balance sheet”.
In a statement, Zaslav argued that “by operating as two distinct and optimised companies in the future, we are empowering these iconic brands with the sharper focus and strategic flexibility they need to compete most effectively in today’s evolving media landscape”.
Wiedenfels added that the separation “will invigorate each company by enabling them to leverage their strengths and specific financial profiles. This will also allow each company to pursue important investment opportunities and drive shareholder value”.
He indicated that the global networks business will focus on “further identifying innovative ways to work with distribution partners to create value for both linear and streaming viewers globally while maximising our network assets and driving free cash flow”.
Shares of WBD have remained depressed since the merger, but spiked over 8% in pre-market trading on the announcement of the split today (Monday).
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