Warner Bros. Discovery (WBD) stock rose as much as 6% Thursday before paring some gains, driven by ongoing speculation about a potential company breakup.
CNBC’s David Faber said on air that an announcement could come “in the not-too-distant future,” suggesting WBD may be preparing to fully separate its declining linear cable networks from its studio and streaming businesses.
Warner Bros. did not immediately respond to Yahoo Finance’s request for comment.
There have been some hints at a future split. Last year, WBD said it would undergo a corporate restructuring to separate its legacy networks, including CNN, TBS, TNT, HGTV, and the Food Network, from growth drivers like studios and its streaming platform Max.
That restructuring is expected to be completed in mid-2025.
“They’ve already done all of the reapportioning necessary,” Faber said, pointing out that, for the first time, the company broke out each business segment in its Q1 earnings report, released before the bell on Thursday. According to him, that’s usually a sign that a split may be on the horizon. Still, he added, “When will that come? How will it come? That, of course, remains the question.”
Speculation about a breakup has intensified over the past year as the media conglomerate struggles to reduce debt, streamline operations, and reignite growth in a rapidly evolving media landscape. Currently, WBD has about $38 billion in total debt after repaying $2.2 billion in debt during the first quarter.
Against this backdrop of financial pressure and industry transformation, broader market dynamics have also weighed on media dealmaking.
Last year saw crimped deal volumes as interest rates remained elevated and an unfavorable regulatory environment dampened sentiment. While there was optimism that 2025 could spark a rebound, President Trump’s unpredictable tariff policies have added uncertainty to the outlook.
At the same time, interest rates remain stubbornly high, with the Federal Reserve signaling it will wait for greater economic clarity before considering any cuts.
Read more about Warner Bros. Discovery’s stock moves and today’s market action
While the future remains unclear, some strategic shifts are already underway. Late in 2024, Comcast (CMCSA) said it would spin off most of its cable properties into a new company, recently named Versant.
Wall Street analysts suggest Comcast’s soon-to-launch spinoff, expected to debut by year’s end, could acquire other beaten-down cable properties, describing it as a positive development for competitors exposed to traditional networks, such as WBD.
The long-term decline of the traditional cable business has been driven by structural shifts in how audiences consume content. For years, linear advertising and affiliate fees — the fees pay-TV providers pay to network owners to carry their channels — had consistently boosted revenues for legacy media. But the shift to streaming saw cable subscribers decline, hurting affiliate revenue.
In the first quarter, WBD reported an 11% year-over-year drop in linear advertising revenue (excluding foreign exchange), and adjusted EBITDA for its linear networks segment fell 14%, highlighting the ongoing challenges.
The pressure from deteriorating linear networks, coupled with heavy debt loads, has forced WBD, among other legacy players, to cut costs wherever possible. That has resulted in mass layoffs and restructuring efforts across the entire industry.
Last summer, WBD and Paramount Global (PARA) took a collective $15 billion hit on the values of their respective cable businesses. Even Disney (DIS) has explored cleaving off its traditional TV assets, which include broadcast network ABC and cable channels like FX, Freeform, and National Geographic.
Disney CEO Bob Iger has since walked back comments that signaled a potential asset sale, but the option could still be revisited, according to analysts.
And with Paramount’s deal with Skydance Media set to close in the second half of 2025, it remains unclear what will happen to Paramount’s cable and TV properties after the merger.
“There are a lot of efficiencies to be had by combining many of these companies,” Bank of America analyst Jessica Reif Ehrlich previously told Yahoo Finance. “Can these companies survive as part of a bigger entity? Yes, of course they can.”
Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
