Apple Inc. is in discussions to license more films from major Hollywood studios to enhance its Apple TV+ streaming service, according to sources familiar with the matter.
TakeAway Points:
- Apple is in discussions to licence additional films from big Hollywood studios, in an effort to provide a wider selection of material for its Apple TV+ streaming service.
- Warner Bros. Discovery (WBD) is contemplating various options for restructuring, such as divesting its assets and dividing its studio and digital streaming divisions from traditional TV networks.
- Should WBD split occur, the established pay-TV networks would retain the majority of the $39 billion in debt, with the newly formed streaming spin-off aiming for a higher valuation.
Apple TV+ Licensing
The tech giant has approached several of the largest studios to acquire more programming from their libraries, aiming to offer a broader selection to customers both in the US and internationally. A representative for Apple did not respond to a request for comment.
Unlike other streaming services that offer a mix of new series and extensive libraries of older content, Apple TV+ has primarily focused on original productions. While it has had some notable successes, such as “Ted Lasso” and “The Morning Show,” the platform has struggled to consistently produce hits.
This week, Apple TV+ received 72 Emmy nominations, the highest in its history, but many of its original films, like the spy action movie “Argylle,” have underperformed. According to research firm MoffettNathanson LLC, only 11% of US households use Apple TV+, compared to 55% for Netflix Inc.
Earlier this year, Apple licensed about 50 movies from Hollywood studios in the US, including classics like “Mean Girls” and “Titanic.” This initial experiment was successful enough that Apple is now seeking to license more titles, either for international distribution or to expand its library further.
Hollywood studios have been anticipating Apple’s move to add more older programs, especially as Wall Street’s focus has shifted from subscriber growth to profitability. Companies like Warner Bros. Discovery Inc. and Walt Disney Co. have become more open to licensing their content to competitors as a way to boost revenue.
Warner Bros. Discovery’s Restructures
Warner Bros. Discovery (WBD) is considering a significant restructuring to boost its sagging share price, according to sources familiar with the matter. The media giant, which owns CNN and HBO, is exploring options ranging from selling assets to splitting its digital streaming and studio businesses from its legacy television networks. This move aims to create a new company unburdened by most of WBD’s current $39 billion net debt load.
WBD’s market capitalization has fallen by a third to about $20 billion over the past year. Although the company has not yet hired an investment bank to initiate any specific transaction, top management has been consulting with advisers to find a solution that serves shareholders’ best interests. WBD’s major backers include cable billionaire John Malone and the Newhouse family, which controls Condé Nast.
The company has also informally approached advisers to rival media groups to gauge interest in potential mergers and acquisitions involving some of its existing assets. Earlier considerations included combinations with Comcast’s NBCUniversal and Paramount, which has since agreed to sell itself to David Ellison’s Skydance studio. WBD declined to comment on these discussions.
Potential Impact of a Split
A break-up appears to be the most viable option for WBD, according to sources. Most of the company’s debt could remain with the mature pay-TV networks business, potentially allowing the faster-growing streaming spin-off to achieve a higher valuation multiple. However, analysts at Bank of America have warned that such a split could have a “potentially devastating” impact on bondholders. WBD rival Lionsgate recently faced a creditor revolt after separating its Starz pay-TV network.
The “strategic spin-off” under consideration would create a company comprising WBD’s legacy television assets, which still generate most of its cash flow. This would leave the streaming and studio businesses with fewer borrowings and more flexibility to invest in growth. However, this move could face complications, such as the need for the two separate companies to negotiate terms for sharing sports rights and other content currently distributed on both digital and traditional television platforms.
