Warner Bros. Discovery May Divorce the WB Studio and Max from TV

Warner Bros. Discovery may have just discovered a way out of its self-made mess.

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Earlier this week, news broke that WBD was cutting just under a thousand (more) jobs . It’s also likely the company will lose its lucrative NBA rights deal in a matter of days. David Zaslav still has $40 billion in debt to pay down from the 2022 merger of WarnerMedia and Discovery; the company’s stock price has sunk 70 percent since then.

One “Barbie” and 91 Emmy nominations for HBO and the newly profitable Max can’t fix this alone. But maybe your bank can.

In a memo sent this week to clients (and obtained by IndieWire) a Bank of America media analyst had some suggestions: 1) Sell the company, 2) Split it up, or 3) Find a partner and merge once again.

“We still believe several of WBD’s assets are best in class with tremendous unrecognized value,” analyst Tom Curcuruto wrote. But the publicly-traded company, as it currently is made up, “is not working.”

The main scenario Curcuruto maps out is a spinoff of WBD’s studio assets (Warner Bros. Pictures, DC, HBO, WBTV) and its Direct-to-Consumer (DTC) branch (HBO the channel, Max, Discovery+) as its own separate, standalone entity, leaving all the basic-cable networks (TNT, TBS, HGTV, TCM, CNN, Food Network, etc.) to fend for itself. Much of WBD’s debt lies within the basic cable channels — while they still generate cash, their value is dwindling. A split could unlock value on the studio and streaming side.

And wouldn’t you know it, a report in Financial Times on Thursday suggests that David Zaslav is considering exactly that possibility, as well as others. Sources who spoke to the publication believe a split is his strongest option.

A spokesperson for Warner Bros. Discovery declined comment to IndieWire on the Bank of America suggestions and the Financial Times story.

There are risks, of course. Like, how are those basic-cable channels going to pay off that debt load?

There is also precedent: Lionsgate recently (finally) split its studio assets from Starz . Creditors didn’t like that one either, but we’re all waiting for some huge Lionsgate sale to pay off the spin.

Stop with all that “nonsense,” LightShed’s Rich Greenfield wrote in a Thursday note to his clients (obtained by IndieWire). Breaking up WBD would be “nonsensical,” he continued.

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Cable is approaching dinosaur status, but it is those old Discovery and Scripps networks that at present still generate much of WBD’s cash flow.

“Given the need to aggressively invest in streaming content, tech and marketing, creating a standalone studio/streaming business with very little cashflow generation would appear irresponsible,” Greenfield wrote. “You need the cashflow from Turner/Discovery to build a robust streaming business.”

Hey, there’s always an outright sale of the company. Grow or die, right? But as Bank of America points out, good luck finding a buyer willing to cover that debt load.

Selling individual assets is a bit more likely — but not by much. Warner Bros. Discovery could try to sell off CNN or its gaming division, Curcuruto suggests, but both of those have lost a lot of value in recent years.

Door number 3 is form a joint venture with another media company — sort of like a bigger version of Venu , the sports JV Warner Bros. is launching this fall with Disney and Fox. On the subject, what if WBD just merged with Fox? After all, Curcuruto says Warner Bros. Discovery’s “glaring hole” is the lack of a broadcast network. Though an even-older medium than cable, broadcast television tends to have live sports and good advertising rates. Out goes the NBA, in would come the NFL, the World Series, and college football.

One small hiccup: Fox’s appetite to actually do anything like this though is “unclear at this moment,” Curcuruto wrote. As Greenfield points out, the gift of WBD stock is not quite the same as getting shares in Disney .

Max is certainly in a bundling mood , so bring on a strategic partner to breathe new life into the service. Or do the opposite.

Greenfield believes the best thing to do with Max is to kill it entirely. Give HBO its own standalone streaming service in the states (again — remember HBO Now?) and turn the brand into an arms dealer internationally. And oh yeah, keep Discovery+ as a niche and profitable little streamer.

Whatever you do, do something , each of the analysts implored.

“Staying the course appears to be untenable,” Curcuruto wrote.