Warner Bros. Discovery (WBD, Financial) is gearing up for a potential split between its linear cable networks and its studio-plus-streaming arm, Max, even as it rolls out a password-sharing crackdown to boost streaming revenue.

The media giant's shares climbed nearly 5% on reports—first surfaced by CNBC—that it could soon announce the separation of its legacy cable business from its more growth-oriented studio and Max platform.

Those reports come on the heels of lackluster Q1 results, where revenue and profit missed consensus, but Max shone: streaming subscriptions hit 122.3 million globally, up 5.3 million in the quarter, and operating results outperformed legacy segments.

To capitalize on that momentum, CEO JB Perrette unveiled an “Extra Member Add-On” for $7.99 per month, letting subscribers share access outside their household. While initial password-sharing reminders will be “soft,” WBD plans to ramp up enforcement through device and IP monitoring later in 2025 and into 2026—mirroring Netflix's (NFLX) successful ARPU lift. Management reaffirmed Max's positive outlook even as it navigates the logistics and regulatory scrutiny around a major corporate restructuring.

Why it matters: Splitting the cable networks from the studio/streaming business could unlock shareholder value by creating two more focused companies, while a tighter grip on password sharing promises higher average revenue per user for Max.

Investors will watch for an official split announcement—potentially as soon as this quarter—and track Max's subscriber and ARPU trends when WBD reports Q2 earnings in early August.