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Despite reporting first quarter revenue that fell short of analyst expectations, Warner Bros. Discovery (WBD) stock is moving to the upside after CNBC reported that the company may split its cable and streaming businesses.
Morning Brief hosts Madison Mills and Brad Smith explain what the move could mean for investors.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
Warner Brothers Discovery shares moving higher despite the media giant missing revenue expectations in its fiscal first quarter. Seeing some headlines that explain the move. According to CNBC, Warner Bros Discovery is moving towards splitting the company here. The timing is unclear. It would take time, but also the company did break out all of the individual businesses in its earnings release. So potentially that being a tease of a potential split. The split would look like linear cable on one side, the other being studio and max in terms of the company's results here. Here revenue for distribution, advertising, and content segments declined across the board on an annual basis. The company attributing a 25% drop in content revenue to weaker box office performance and a lack of game releases during the three-month period as well. Warner Brothers ending the quarter with more than 122 million streaming subscribers, a 5.3 million increase from the previous quarter, but those gains were offset by a steady decline in pay TV subscribers, as viewers increasingly turning away from traditional cable models. And as I just mentioned CNBC reporting this morning that the company's moving towards that split, according to the reports. The split would divide its linear cable business from the company studio and streaming division spread.
Yeah, you hear an announcement like that and how the company is thinking through it, and you immediately go to a shareholder release or any type of letter and look for the words cost discipline. And that's exactly what you got here within the shareholder release. The challenging and uncertain environment they remarked as, they remain focused on optimizing global linear networks performance, maximizing cash flows through cost discipline, and prudent content investment. As part of that strategy, they went on to say whether it's offering pay TV subscribers authenticated access to max ad light tier or providing incremental billing and packaging flexibility, trying to work with distributors they're doing right now to enhance the value of pay TV subscriptions, which speaks exactly to the kind of separation and and how this division could essentially work here based on what the company has also talked about in the past. You'll remember in December of 2024, they essentially had announced that they were going to be looking for optionality to pursue further value creation opportunities for these two divisions, global linear networks and streaming and studios here. So it's just a matter of exactly how they're investing or continuing to invest into what has been the behemoth, the juggernaut that the linear business has been. However, how much of that and that effort is also now moving over to the streaming side as well, and how the company's thinking about it more holistically on aggregate as well.
Absolutely.