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Warner Bros. Discovery (WBD) Explores Sale of Music Library
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Warner Bros. Discovery (WBD - Free Report) recently announced that it is looking for potential buyers for the sale of the music copyright that it owns.
This decision comes amid the high leverage of $50 billion that the company’s balance sheet holds due to the unsuccessful merger of Warner Media and Discovery in April last year.
The sale of the music library, which will include the most valuable soundtrack of the Batman movie and also other tracks by renowned singers such as Bob Dylan, Bruce Springsteen, Neil Young and Joey Ramon, could fetch $1 billion for Warner Bros. Discovery, thus helping it to reduce its debt to some extent.
Besides this, it is been seen that music is gaining more traction on streaming platforms such as Spotify (SPOT - Free Report) in recent times. Per Wall Street Journal, investors and music publishers are buying super-hit catalogs for as much as 30 times their average annual royalty. Thus, this establishes a perfect timing for Warner Bros. Discovery to sell its music catalogs at a good price.
However, during the sale, Warner Bros. Discovery needs to ensure the retaining sell-ability of the famous movie tracks to use the music in the upcoming sequels or spinoffs.
Warner Bros. Discovery Makes Efforts to Deleverage Its Balance Sheet
The hefty debt of Warner Bros. Discovery has been concerning top management for a long time now. To address this, CEO David Zaslav said in November last year that the company would be looking to cut costs by $3.5 billion over the next two years.
The initiation of the cost-cutting was done through hundreds of layoffs of workers and the cancellation of multiple high-budget projects including the much-awaited Batgirl, Wonder Woman 3 and Man of Steel 2.
Along with this, Warner Bros. Discovery also focused on restructuring its streaming division, which considerably could become a significant source of revenues. It eliminated its CNN Plus within one month of launch, per The Verge, it managed to attract only 150,000 subscribers in two weeks in comparison to its competitors like Walt Disney’s (DIS - Free Report) Disney Plus, which had 10 million subscribers on its very first day.
Per The Verge, CNN Plus, if functioned, could incur a projected loss of around $500 million in the next two years, which in no way would help abate the debt. Thus, it seems that the company’s decision of shutting it down was pertinent.
Warner Bros. Discovery is about to bring HBO Max and Discovery Plus under one unit as Max by spring this year. The combined resources of both units could make management easy and provide viewers with varied content that aids its top line. A growing top line, along with cost cuts could provide positive cash flow to the company, which could be used to pay back debts.
It recently announced an increase in the ad-free HBO Max streaming plan as well, which could boost advertising revenues that account for almost 20% of its total revenues.
The company expects that these changes will make it healthier going forward and could potentially revive its share price, which declined 57.9% year to date compared with the Zacks Consumer Discretionary sector, which fell 26% in the same time frame.
Though these cost cuts and restructuring could help Warner Bros. Discovery pay back its current portion of the debt, which stands at $1.2 billion, on a long-term basis, the company has to strengthen its content offerings to attract viewers that could add to its revenues and gradually lead the company toward profitability and help it manage its debt.
A better-ranked stock in the same sector is Nexstar Media Group (NXST - Free Report) , sporting a Zacks Rank #1.
Shares of Nexstar Media Group have gained 8.2% in a year. The Zacks Consensus Estimate for earnings is pegged at $7.57, which has been constant over the past 30 days.
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Warner Bros. Discovery (WBD) Explores Sale of Music Library
Warner Bros. Discovery (WBD - Free Report) recently announced that it is looking for potential buyers for the sale of the music copyright that it owns.
This decision comes amid the high leverage of $50 billion that the company’s balance sheet holds due to the unsuccessful merger of Warner Media and Discovery in April last year.
The sale of the music library, which will include the most valuable soundtrack of the Batman movie and also other tracks by renowned singers such as Bob Dylan, Bruce Springsteen, Neil Young and Joey Ramon, could fetch $1 billion for Warner Bros. Discovery, thus helping it to reduce its debt to some extent.
Besides this, it is been seen that music is gaining more traction on streaming platforms such as Spotify (SPOT - Free Report) in recent times. Per Wall Street Journal, investors and music publishers are buying super-hit catalogs for as much as 30 times their average annual royalty. Thus, this establishes a perfect timing for Warner Bros. Discovery to sell its music catalogs at a good price.
However, during the sale, Warner Bros. Discovery needs to ensure the retaining sell-ability of the famous movie tracks to use the music in the upcoming sequels or spinoffs.
Warner Bros. Discovery Makes Efforts to Deleverage Its Balance Sheet
The hefty debt of Warner Bros. Discovery has been concerning top management for a long time now. To address this, CEO David Zaslav said in November last year that the company would be looking to cut costs by $3.5 billion over the next two years.
The initiation of the cost-cutting was done through hundreds of layoffs of workers and the cancellation of multiple high-budget projects including the much-awaited Batgirl, Wonder Woman 3 and Man of Steel 2.
Along with this, Warner Bros. Discovery also focused on restructuring its streaming division, which considerably could become a significant source of revenues. It eliminated its CNN Plus within one month of launch, per The Verge, it managed to attract only 150,000 subscribers in two weeks in comparison to its competitors like Walt Disney’s (DIS - Free Report) Disney Plus, which had 10 million subscribers on its very first day.
Per The Verge, CNN Plus, if functioned, could incur a projected loss of around $500 million in the next two years, which in no way would help abate the debt. Thus, it seems that the company’s decision of shutting it down was pertinent.
Warner Bros. Discovery is about to bring HBO Max and Discovery Plus under one unit as Max by spring this year. The combined resources of both units could make management easy and provide viewers with varied content that aids its top line. A growing top line, along with cost cuts could provide positive cash flow to the company, which could be used to pay back debts.
Warner Bros. Discovery, Inc. Price and Consensus
Warner Bros. Discovery, Inc. price-consensus-chart | Warner Bros. Discovery, Inc. Quote
It recently announced an increase in the ad-free HBO Max streaming plan as well, which could boost advertising revenues that account for almost 20% of its total revenues.
The company expects that these changes will make it healthier going forward and could potentially revive its share price, which declined 57.9% year to date compared with the Zacks Consumer Discretionary sector, which fell 26% in the same time frame.
Though these cost cuts and restructuring could help Warner Bros. Discovery pay back its current portion of the debt, which stands at $1.2 billion, on a long-term basis, the company has to strengthen its content offerings to attract viewers that could add to its revenues and gradually lead the company toward profitability and help it manage its debt.
Zacks Rank & Stock to Consider
Warner Bros. Discovery currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A better-ranked stock in the same sector is Nexstar Media Group (NXST - Free Report) , sporting a Zacks Rank #1.
Shares of Nexstar Media Group have gained 8.2% in a year. The Zacks Consensus Estimate for earnings is pegged at $7.57, which has been constant over the past 30 days.