Warner Bros. Discovery concludes the first entertainment earnings cycle of 2025 facing critical questions about its future viability.

WBD’s strategic rationale remains unclear. Its persistent YoY total revenue declines raise concerns about long-term growth prospects. While the company has made progress on its massive debt position, this $40B albatross continues to deter strategic content investments.

WBD remains a close second to Disney in corporate demand share, a healthy measure of library value and potential longevity. This suggests the company has the content goods to compete at the highest level, but its future hinges on effectively leveraging these programming assets.

HBO, the company’s crown jewel, accounts for 31.4% of Max’s subscriber revenue in the most recently reported quarter, highlighting its crucial role in the streaming platform’s performance. This is a big over performance compared to HBO’s 15% supply share. This dominance underscores both the strength of the HBO brand and the challenge of expanding Max’s reach beyond its core audience.

Max has yet to achieve top tier streaming scale compared to giants like Netflix, Prime Video, and Disney+. Despite adding Discovery’s massive content library, growth has fallen short of expectations, raising questions about the merger’s strategic rationale. This disparity raises the fundamental question: can WBD compete independently for the long haul? If so, what’s required? If not, what’s the best move forward?

The impact of Comcast’s ‘SpinCo’ move has yet to play out, but WBD execs will be watching this closely. Strategic M&A options should be on the table, perhaps joining forces with Spin-Co, or even what’s left of NBCUniversal. Will WBD pursue further streamlining, like spinning off underperforming cable assets and effectively revert to a structure resembling the pre-merger WarnerMedia and Discovery, Inc?

Ultimately, WBD faces a complex strategic landscape. Divesting non-core assets to generate cash and sharpen focus, or exploring strategic partnerships and M&A opportunities to achieve the scale necessary to compete effectively are all potential paths forward.

Max Subscriber Revenue Share

• Even after dropping HBO from its flagship platform’s name, the premium cable network remains WBD’s streaming cash cow.
• HBO accounted for 31.4% of Max’s UCAN TV subscriber revenue in Q3 2024, despite producing just 15% of the platform’s TV supply.
• Cartoon Network and Adult Swim have a strong presence, with a combined 13.7%, highlighting the continued strong appeal of animated and late-night programming, and its importance to WBD’s ecosystem.
• Discovery’s linear assets play a more modest role, as TLC (3.8%) and Discovery Channel (5.3%) are the top performers from the Discovery Communications side of the merger.

Could SpinCo Pave The Way for WBD?

• If the Streaming Era has taught us anything, it’s that all options are always on the table. Despite regulatory challenges—particularly around CNN and MSNBC—a hypothetical WBD-NBCUniversal merger would boast impressive market share, ranking first in both corporate demand share (26.0%) and total catalog share (24.1%).
• A Max-Peacock merger would serve nearly 80 million high-ARPU UCAN customers, second only to Netflix.
• Max’s global expansion could help Peacock scale internationally, while combining Discovery and Bravo’s unscripted content would create a dominant force in reality TV. The digital future for these legacy players remains uncertain—but consolidation may be the next move.

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