The news of a potential split sent WBD's shares soaring by over 4% during Thursday's trading session, recovering from an earlier dip of nearly 6%. This initial decline followed the release of a disappointing first-quarter earnings report, which revealed missed revenue targets and a larger-than-anticipated loss. The company attributed these results to a weak performance at the box office and the ongoing decline in its cable television subscriber base.
Navigating the "General Disruption" in Media
The media industry is currently undergoing a profound transformation, characterized by a mass exodus of subscribers from traditional cable TV towards streaming platforms. This shift, described by some industry executives as a "general disruption," has placed immense pressure on media companies to consistently produce compelling studio content and achieve profitability within their streaming ventures.
In a move that foreshadowed a potential divestiture, WBD announced in December a separation of its declining cable TV assets from its streaming and studio operations. The company's first earnings report under this new organizational structure was released on Thursday.
Aligning with Industry Trends
A potential breakup of WBD would align it with other major players in the media landscape, such as Comcast. Comcast is in the process of spinning off its NBCUniversal cable TV networks, including MSNBC and CNBC, as it strategically positions itself for growth in the streaming-centric era.
Analyst Perspectives and Debt Considerations
Industry analysts have long speculated about the possibility of a breakup for WBD, which was formed in 2022 through the merger of Warner Media and Discovery. Ross Benes, an analyst at eMarketer, commented on the potential move, stating, “WBD would be leaner and have stronger growth potential without cable assets. But finding a buyer could be difficult. Linear TV is deteriorating and WBD has big debts.”
WBD currently holds a significant gross debt of $38 billion. The company did not provide any official response to Reuters' request for comment regarding the CNBC report.
Streaming Success Amidst Studio Setbacks
Despite the overall disappointing financial results, WBD's CEO, David Zaslav, highlighted the strength of the company's programming in driving subscriber growth for its streaming service, Max. WBD reported an addition of 5.3 million streaming subscribers in the first quarter, surpassing analysts' estimates of 3.1 million. This brought the total subscriber count to 122.3 million. Key content during the period included the third season of HBO’s critically acclaimed series "The White Lotus" and the new medical drama "The Pitt."
However, the company's overall performance was negatively impacted by a lackluster showing at the box office. WBD struggled to replicate the phenomenal success of "Dune: Part Two" from the previous year, which grossed over $700 million. Its major release for the quarter, Bong Joon Ho’s sci-fi dark comedy "Mickey 17," barely exceeded its reported budget in box office earnings.
Consequently, studio revenue experienced a significant decline of 18%, falling to $2.31 billion and missing analysts' expectations of $2.73 billion.
Promising Start to the Second Quarter
Despite the first-quarter challenges, WBD has seen a strong start to the second quarter with the success of Ryan Coogler’s horror film "Sinners" and the blockbuster "A Minecraft Movie." The latter has already generated approximately $900 million globally, making it the highest-grossing release of 2025 thus far.
Declining Revenue in TV Networks
The TV networks segment, which encompasses channels such as CNN, Discovery Channel, and Animal Planet, also experienced a decline in revenue, falling by 7%.
Overall Financial Performance Falls Short
Overall, WBD's revenue for the first quarter fell by 10% to $8.98 billion, falling short of analysts' average estimate of $9.60 billion. The reported loss per share of 18 cents was also greater than the expected loss of 13 cents.
The potential breakup of Warner Bros. Discovery underscores the significant pressures facing traditional media companies as they navigate the evolving landscape of streaming and the decline of cable television. The strategic decisions made in the coming months will be crucial in shaping the future of this major media player.