Warner Bros Discovery Sets Stage For Potential Cable Deal By

ShannonMur

Shares jump 13% after restructuring announcement


Follows course taken by Comcast's brand-new spin-off business


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Challenges seen in selling debt-laden direct TV networks


(New throughout, includes information, background, comments from industry experts and experts, updates share prices)


By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni


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


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


Media business are considering options for fading cable TV organizations, a longtime golden goose where incomes are wearing down as countless consumers accept streaming video.


Comcast last month unveiled strategies to divide most of its NBCUniversal cable networks into a new public business. The brand-new company would be well capitalized and positioned to acquire other cable television networks if the industry combines, one source informed Reuters.


Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable television assets are a "really sensible partner" for Comcast's new spin-off company.


"We highly think there is potential for fairly sizable synergies if WBD's linear networks were combined with Comcast SpinCo," wrote Ehrlich, using the industry term for standard television.


"Further, we believe WBD's standalone streaming and studio possessions would be an appealing takeover target."


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


Streaming platforms Max and Discovery+ will be under a different division in addition to film studios, consisting of Warner Bros Pictures and New Line Cinema.


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


"Streaming won as a behavior," stated Jonathan Miller, primary executive of digital media investment firm Integrated Media. "Now, it's winning as an organization."


Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's new business structure will distinguish growing studio and streaming assets from rewarding but diminishing cable television business, offering a clearer investment picture and likely setting the phase for a sale or spin-off of the cable unit.


The media veteran and advisor anticipated Paramount and others might take a similar path.


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


"The concern is not whether more pieces will be moved or knocked off the board, or if more consolidation will take place-- it is a matter of who is the buyer and who is the seller," wrote Fishman.


Zaslav indicated that scenario during Warner Bros Discovery's financier call last month. He stated he prepared for President-elect Donald Trump's administration would be friendlier to deal-making, opening the door to media market combination.


Zaslav had taken part in merger talks with Paramount late last year, though a deal never materialized, according to a regulative filing last month.


Others injected a note of caution, keeping in mind Warner Bros Discovery brings $40.4 billion in debt.


"The structure modification would make it simpler for WBD to sell its direct TV networks," eMarketer analyst Ross Benes stated, describing the cable TV business. "However, discovering a purchaser will be difficult. The networks owe money and have no signs of development."


In August, Warner Bros Discovery wrote down the worth of its TV possessions by over $9 billion due to uncertainty around costs from cable and satellite suppliers and sports betting rights renewals.


This week, the media business announced a multi-year offer increasing the general fees Comcast will pay to disperse Warner Bros Discovery's networks.


Warner Bros Discovery is sports betting the Comcast arrangement, together with a deal reached this year with cable television and broadband provider Charter, will be a template for future negotiations with distributors. That might help stabilize rates 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)