Warner Bros Discovery Inc. (NASDAQ: WBD), announced on Thursday that it would be splitting its cable network operations from streaming services and its studio operation.
At the time of writing, shares in this media giant are up by 15%.
David Zaslav, the chief executive of the company said today that they continue to prioritize ensuring their Global Linear Networks Business is well positioned in order to continue driving free cash flow. Meanwhile our Streaming & Studios Business focuses on growing.
WBD anticipates that the restructure will be completed before 2025’s second half. The share price of WBD is up by more than 85% since its August low.
Restructuring opens doors for future deals
Warner Bros Discovery is looking for a simplified business structure to highlight the strengths of each division and make them more appealing as a target for deals or acquisitions.
The creation of distinct divisions for linear content and streaming will allow the management to develop more focused strategies, and improve operational efficiency that helps each segment reach its full potential.
This announcement comes at a moment when TV businesses are scrambling for advertising dollars amid a continuing decline in subscriptions.
Comcast, a competitor of AT&T’s TV division announced last month that it would also be separating its cable networks.
The company’s plans to spin off its business have not been able to increase the stock price of recent weeks.
Warner Bros Discovery plays offense and defence
WBD is reorganizing into a separate linear division, and into a streaming service that will be more profitable. This also offers a better view of the profitability and performance of each segment.
Transparency is usually valuable to investors and international decision makers.
Warner Bros Discovery will be able to defend and attack with its two division strategy. Its TV unit, which will be its main cash cow and help lower its debt balance sheet, will focus on growth.
The move would improve WBD’s overall strategic options. This could include a possible merger, spin off, or any other noteworthy plays that aim to create additional shareholder value.
Investors are responding positively, as shown by a 15 percent increase in the stock prices today.
What is the upside potential of WBD?
Warner Bros Discovery’s recent stock strength is partly due to a distribution deal it signed for Xfinity and Sky, both in the United States.
This agreement paves the way for Max to be launched in Europe.
It looks as if the stars are in good alignment for WBD. Benchmark analysts continue to expect WBD’s shares to rise to $18.
The price target suggests that there is potential for a further 45% increase from the current level. WBD does not pay out a written dividend.
The post Warner Bros Discovery splits its streaming and cable business Why? This post may be updated as new information unfolds
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