Warner Bros. Discovery announces plan to split into two companies

Warner Bros. Discovery announced plans on June 9, 2025, to separate into two publicly traded companies, creating distinct entities focused on streaming content production and traditional television networks. The media conglomerate disclosed this strategic restructuring approximately three years after its formation through the merger of WarnerMedia and Discovery.

According to the company's announcement, the separation will establish WBD Streaming & Studios and WBD Global Networks as independent public companies. The transaction is structured to be tax-free for U.S. federal income tax purposes, with completion expected by mid-2026.

Organizational structure and leadership

David Zaslav, current President and CEO of Warner Bros. Discovery, will lead WBD Streaming & Studios following the separation. Gunnar Wiedenfels, the company's Chief Financial Officer, will serve as President and CEO of WBD Global Networks. Both executives will maintain their current positions at Warner Bros. Discovery until the separation concludes.

According to the company's investor presentation, WBD Streaming & Studios will encompass Warner Bros. Television, Warner Bros. Motion Picture Group, DC Studios, HBO, HBO Max, Warner Bros. Games, and production facilities in Burbank and Leavesden. The streaming segment reported 122.3 million global subscribers as of March 31, 2025, representing a 23% increase compared to the prior year quarter.

WBD Global Networks will include CNN, TNT Sports, Discovery Channel, and various international television brands. According to company data, these assets reach 1.1 billion unique viewers across 200 countries and territories in 68 languages. The Global Linear Networks segment generated $4.774 billion in revenues during the first quarter of 2025, though this represented a 6% decrease from the prior year period.

Financial performance and debt management

Warner Bros. Discovery reported consolidated revenues of $8.979 billion for the first quarter of 2025, a 9% decrease excluding foreign exchange impacts compared to the same period in 2024. The company's net loss available to shareholders was $453 million, an improvement from the $966 million loss reported in the first quarter of 2024.

The separation announcement coincides with comprehensive debt restructuring efforts. According to the tender offer presentation, Warner Bros. Discovery launched cash tender offers and consent solicitations for approximately $35.5 billion of outstanding bonds. The tender offers are funded by a $17.5 billion committed bridge facility provided by J.P. Morgan.

The debt tender contemplates six separate pools of consideration with tiered priorities. Pool 1 targets front-end maturities with up to $3.75 billion in cash expenditure. Pool 4, the largest component, focuses on long-dated WMH securities with up to $8.0 billion in potential cash deployment. According to the tender documentation, the offers are priced at significant premiums to pre-announcement market levels.

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Streaming segment performance

The Streaming segment demonstrated strong subscriber growth momentum. According to the first quarter 2025 earnings release, domestic subscribers increased to 57.6 million from 52.7 million in the prior year quarter. International subscribers expanded more dramatically, reaching 64.6 million compared to 46.9 million in the first quarter of 2024.

Revenue performance showed mixed results across subscription metrics. Distribution revenue increased 8% excluding foreign exchange impacts, driven by the 23% subscriber increase. However, global average revenue per user (ARPU) declined 9% to $7.11, primarily due to growth in lower ARPU international markets and increased wholesale distribution of Max Basic with Ads.

Streaming Adjusted EBITDA reached $339 million in the first quarter of 2025, representing a substantial improvement from $86 million in the prior year period. According to company guidance, the streaming business targets at least $1.3 billion in Adjusted EBITDA for 2025.

Studios segment challenges and opportunities

The Studios segment faced revenue headwinds in the first quarter of 2025. Total revenues decreased 16% excluding foreign exchange impacts to $2.314 billion. Content revenue declined 17%, primarily due to lower theatrical and games performance compared to strong prior year comparisons.

Theatrical revenue decreased 27% due to the absence of major releases comparable to "Dune: Part Two" and "Godzilla x Kong: The New Empire" from the prior year quarter. Games revenue declined 48% following the prior year release of "Suicide Squad: Kill the Justice League," which faced significant challenges and required a $187 million impairment in 2024.

Despite revenue pressures, Studios Adjusted EBITDA increased 63% to $259 million, benefiting from reduced content expenses aligned with lower revenue generation. According to company projections, the Studios segment targets at least $3 billion in annual Adjusted EBITDA.

Global Linear Networks decline

The Global Linear Networks segment experienced continued industry-wide pressures. Distribution revenue declined 8% excluding foreign exchange impacts, reflecting a 9% decrease in domestic linear subscribers partially offset by a 2% increase in domestic affiliate rates.

Advertising revenue fell 11% due to 27% audience declines in domestic networks. According to the earnings report, these declines reflect broader industry trends affecting traditional linear television viewership and advertising market dynamics.

The segment maintained strong profitability metrics despite revenue challenges. Global Linear Networks Adjusted EBITDA reached $1.793 billion, though this represented a 14% decrease from the prior year quarter. The business continues generating substantial cash flows with industry-leading margins.

Capital structure optimization

The debt tender offers represent a comprehensive capital structure realignment. According to the tender presentation, the $17.5 billion bridge facility will be refinanced with permanent financing at both separated entities prior to transaction completion.

WBD Global Networks will retain up to 20% ownership in WBD Streaming & Studios, designed to provide incremental cash through future monetization for additional deleveraging. This retained stake structure allows the networks business to benefit from potential streaming growth while maintaining financial flexibility.

The tender offers include provisions for consenting bondholders to receive junior lien exchange options if bonds are not repurchased due to proration. According to the documentation, these junior lien notes would rank senior to existing notes from non-participating holders, creating structural subordination incentives for participation.

Marketing community implications

This separation creates significant implications for the marketing and advertising community. The division of streaming and traditional television assets into separate companies will likely result in distinct advertising sales organizations and strategies.

For streaming advertisers, the separation may accelerate HBO Max's advertising tier development and international expansion. The platform's global reach across 77 markets provides substantial inventory for advertisers seeking premium streaming placements.

Traditional advertisers working with linear television properties will interface with a more focused organization at WBD Global Networks. The concentration of sports, news, and entertainment assets under unified management may streamline media buying processes while potentially affecting pricing dynamics.

The debt restructuring and capital allocation changes may influence content investment strategies at both entities. Reduced leverage could enable increased programming budgets, while financial constraints might affect content acquisition and production decisions that impact advertising inventory quality and availability.

Timeline

The separation timeline extends through mid-2026, subject to multiple closing conditions. According to the announcement, required approvals include final board authorization, tax opinions confirming the transaction's tax-free status, and favorable market conditions.

The tender offers operate on accelerated timelines with consent expiration at 5 p.m. Eastern Time on June 13, 2025, and early tender deadline on June 23, 2025. Final tender expiration occurs July 9, 2025, with settlement expected no earlier than the fourth business day following respective deadlines.

J.P. Morgan serves as sole lead dealer manager and solicitation agent for the tender offers, while Evercore provides co-dealer manager services. Kirkland & Ellis LLP serves as legal counsel for the transaction.

March 31, 2025: Warner Bros. Discovery reports Q1 2025 results showing 122.3 million streaming subscribers and $8.979 billion total revenues

June 9, 2025: Company announces separation plan and launches $17.5 billion debt tender offers

June 13, 2025: Consent solicitation deadline for debt tender offers

June 23, 2025: Early tender deadline for debt offers

July 9, 2025: Final tender offer expiration

Mid-2026: Expected completion of separation transaction