Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares jump 13% after reorganizing statement

Follows course taken by Comcast’s new spin-off business

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Challenges seen in selling debt-laden direct TV networks

(New throughout, adds details, background, remarks from market experts and analysts, updates share rates)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) – Warner Bros Discovery on Thursday decided to separate its declining cable TV services such as CNN from streaming and studio operations such as Max, preparing for a potential sale or spinoff of its TV company as more cable television subscribers cut the cable.

Shares of Warner jumped after the business said the new structure would be more deal friendly and it anticipated to complete the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.

Media business are considering choices for fading cable television organizations, a long time cash cow where revenues are deteriorating as countless consumers embrace streaming video.

Comcast last month unveiled plans to split the majority of its NBCUniversal cable television networks into a brand-new public company. The brand-new company would be well capitalized and placed to obtain other cable networks if the industry combines, one source told Reuters.

Bank of America research analyst Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable assets are a “really sensible partner” for Comcast’s new spin-off company.

“We strongly think there is potential for fairly sizable synergies if WBD’s linear networks were integrated with Comcast SpinCo,” composed Ehrlich, utilizing the market term for standard television.

“Further, our company believe WBD’s standalone streaming and studio assets would be an appealing takeover target.”

Under the new structure for Warner Bros Discovery, the cable organization consisting of TNT, Animal Planet and CNN will be housed in a system called Global Linear Networks.

Streaming platforms Max and Discovery+ will be under a different department along with movie studios, including Warner Bros Pictures and New Line Cinema.

The restructuring reflects an inflection point for the media industry, as investments in streaming services such as Warner Bros Discovery’s Max are lastly paying off.

“Streaming won as a habits,” said Jonathan Miller, chief executive of digital media investment business Integrated Media. “Now, it’s winning as a service.”

Brightcove CEO Marc DeBevoise stated Warner Bros Discovery’s new business structure will differentiate growing studio and streaming properties from profitable however diminishing cable television company, offering a clearer financial investment image and most likely setting the phase for a sale or spin-off of the cable television system.

The media veteran and adviser forecasted Paramount and others might take a comparable path.

CEO David Zaslav, a veteran deal-maker who led Discovery through its acquisition of Scripps Networks Interactive before getting the even larger target, AT&T’s WarnerMedia, is positioning the business for its next chess move, wrote MoffettNathanson expert Robert Fishman.

“The question is not whether more pieces will be moved or knocked off the board, or if further combination will happen– it is a matter of who is the purchaser and who is the seller,” wrote Fishman.

Zaslav signified that circumstance throughout Warner Bros Discovery’s financier call last month. He said he anticipated President-elect Donald Trump’s administration would be friendlier to deal-making, unlocking to media industry consolidation.

Zaslav had engaged in merger talks with Paramount late in 2015, though a deal never ever emerged, according to a regulative filing last month.

Others injected a note of care, keeping in mind Warner Bros $40.4 billion in financial obligation.

“The structure change would make it much easier for WBD to sell off its linear TV networks,” eMarketer analyst Ross Benes stated, describing the cable TV organization. “However, discovering a buyer will be challenging. The networks owe money and have no indications of growth.”

In August, Warner Bros Discovery documented the value of its TV assets by over $9 billion due to unpredictability around fees from cable and satellite suppliers and sports betting rights renewals.

Today, the media business revealed a multi-year deal increasing the general costs Comcast will pay to distribute Warner Bros Discovery’s networks.

Warner Bros Discovery is wagering the Comcast arrangement, together with a deal reached this year with cable television and broadband company Charter, will be a design template for future negotiations with suppliers. That could help stabilize prices for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles; Editing by Shilpi Majumdar, Arun Koyyur, Keith Weir and David Gregorio)