In a bid to boost its declining share price, Warner Bros. Discovery, the parent company of CNN and HBO, is reportedly considering a plan to separate its digital streaming and studio businesses from its traditional television networks. The move comes just two years after the mega-merger between Warner Bros. and Discovery.

David Zaslav, the CEO of Warner Bros. Discovery, has explored various strategic options to address the company's financial challenges. These options include selling assets and potentially spinning off the Hollywood studio, Warner Bros., along with its streaming service, Max, into a new entity. The aim is to create a separate company that is not burdened by the hefty $39 billion debt load of the parent company.

The market capitalization of Warner Bros. Discovery has fallen by a third, now standing at around $20 billion, and its stock has plummeted nearly 70% since the merger in 2022. This has prompted the company's top management to seek solutions in the best interest of shareholders.

While Warner Bros. Discovery has yet to hire an investment bank to initiate any specific transaction, discussions have taken place with advisors to explore potential mergers and acquisitions with rival media groups. The company's largest backers, including cable billionaire John Malone and the Newhouse family, have informally approached these rivals to gauge interest in exploring such options.

However, it is important to note that Warner Bros. Discovery might decide to continue operating in its current structure, with no changes to its business operations. The company has a diverse portfolio of cable channels, including TLC, Food Network, Animal Planet, and HGTV.

The idea of splitting the company is seen as a strong option, as it could allow the faster-growing streaming service to spin off and potentially achieve a higher valuation multiple. This would mean that most of the debt would remain with the legacy pay-TV networks. Nevertheless, there is a risk of potential creditor backlash that the management is well aware of.

Analysts, including those from Bank of America, have suggested exploring strategic alternatives, such as spinning off the Warner Bros. movie studio and streaming service Max from the linear TV channels. This move could potentially create more shareholder value. The estimated value of CNN alone is around $6 billion, making it a valuable asset in any potential scenario.

These discussions on strategic alternatives coincide with Warner Bros. Discovery laying off 1,000 employees and searching for ways to restructure the struggling cable news network, CNN. Additionally, the company faces financial challenges in its linear business, the impact of a soft advertising environment, and repercussions from last year's Hollywood strikes.

Warner Bros. Discovery is at a critical juncture, as it faces the possibility of losing its long-running NBA media rights to competitors such as Amazon and NBC. CEO David Zaslav has hinted at the company's interest in making deals, calling for opportunities for consolidation and deregulation to help the company thrive.

It remains to be seen whether Warner Bros. Discovery will proceed with the proposed split and pursue other strategic options. As the media landscape continues to evolve, the company aims to find a path that ensures growth, financial stability, and increased shareholder value.