WBD reportedly close to separating off linear networks, Max adds five million subs

HBO and Max released S3 of The White Lotus in March

Warner Bros Discovery (WBD) is reportedly close to splitting its linear networks and its studio/streamer assets into two separate companies, in a move similar to the one currently being executed by Comcast.

CNBC’s David Faber on Thursday reported on business series Squawk Box that an announcement could be made in the “not-too-distant” future.

“What would that split look like? Well, most likely, or almost definitely, it’s the linear cable networks and then you have the studio coupled with Max,” said Faber.

New York-headquartered WBD has already moved towards a split, revealing a plan in December to reorganise into two main divisions, one for its linear networks and the other for its studio and streamer.

At the time, WBD said the rejig would “increase optionality” when it considered future changes. That reorganisation was completed earlier this year.

One of the key questions highlighted by Faber is how WBD’s debt pile, which currently stands at US$38bn, would be apportioned if the company does split into two.

Rival media group Comcast is already deep into spinning off seven of its cable channels – USA Network, CNBC, MSNBC, Oxygen, E!, Syfy and Golf Channel – in addition to digital assets Fandango, Rotten Tomatoes, GolfNow and SportsEngine into a separate publicly traded company. The company, which was officially named Versant this week, will be spun off by the end of the year, according to execs.

Faber’s report came just after WBD reported its first-quarter earnings, with overall revenue falling 10% to US$8.99bn and adjusted earnings remaining roughly flat at US$2.11bn.

The revenue decline was driven primarily by an 8% drop in advertising revenue, caused by falling linear ad revenue and a 28% drop in content revenue, mainly from lower box office and home entertainment.

WBD continued to post improvements in its streaming business, with revenue growing 8% to US$2.66bn and adjusted earnings jumping to US$339m, compared with US$86m in the same quarter a year ago.

WBD added 5.3 million subscribers globally to reach 122.3 million in Q1, with execs noting that the company remains on course to hit its target of 150 million Max subscribers by the end of 2026.

In its studios segment, revenue was down 18% at US$2.31bn while adjusted earnings rose 41% to US$259m.

In its global linear networks segment, revenue fell 7% to US$4.77bn in Q1 as the impact of cord-cutting and advertising declines continued to take a toll. Of course, this segment continues to be the major profit engine for WBD, with adjusted earnings of US$1.79bn in the quarter. However, that was down 15% from US$2.12bn the previous year.

Key titles released by HBO and Max during Q1, which ended on March 31, include season three of The White Lotus and medical drama The Pitt, while new seasons of post-apocalyptic drama The Last of Us and comedy Hacks launched in April.

WBD stock rose over 5% to US$9 per share following the CNBC report.