Is Warner Bros. Discovery About to Spin Off Max and the Studio from TV Assets?

It has been challenging for Warner Bros. Discovery. They've had a very poor press cycle with looming job losses and the potential loss of its lucrative rights to the NBA games. Last week, reports surfaced that Warner Bros. Discovery may address some of its recent financial messes by splitting up the company assets. Other proposed solutions have been selling the company or merging again with a new partner. Blake & Wang P.A.  the entertainment attorney in Los Angeles, Brandon Blake, looks more closely at this new development.

                                                                        Brandon Blake

"Not Working" for Wall Street

On the financial side, many analysts believe that Warner Bros. Discovery has solid assets with considerable potential but also that the current company structure could be working better with them. Spinning off the WBD studio assets, alongside its DTC and streaming assets, from its cable networks may be the best solution. After all, most of the WBD debt issues are on the cable channel side, so this could boost the value of other assets. Interestingly, reports that David Zaslav is actively pursuing this solution are circulating at the moment.

Still Risky

It's certainly a solution with some potential. However, it also begs the question of how the basic cable channel side of the business would ever pay off its debt load without the boost streaming and the studio assets brought to the table. The cable side of the business generates a decent cash flow for WBD.

Without cash flow generation, those same streaming and studio assets would be in a regrettable position, given the need for aggressive investment in not only content but also technology and marketing, which would require developing them further. Then again, Lionsgate's recent split with Starz shows it can be done without massive knock-on consequences.

 

There are plenty of different scenarios that might work out for WBD. Given the mood developing around the company, however, one thing is clear: If WBD waits too long to address these looming issues, it may well shoot itself in the foot. Right now, some action is called for—the only remaining question is what that action will be.