Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares dive 13% after reorganizing statement

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

*

Challenges seen in offering debt-laden direct TV networks

(New throughout, adds information, background, comments from industry experts and analysts, 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 services such as CNN from streaming and studio operations such as Max, laying the groundwork for a prospective sale or spinoff of its TV service as more cable television customers cut the cable.

Shares of Warner leapt after the business stated the brand-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 choices for fading cable services, a longtime cash cow where revenues are deteriorating as millions of customers embrace streaming video.

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

Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable tv properties are a “really logical partner” for Comcast’s brand-new spin-off company.

“We strongly think there is potential for fairly sizable synergies if WBD’s linear networks were combined with Comcast SpinCo,” wrote Ehrlich, utilizing the industry term for traditional tv.

“Further, we believe WBD’s standalone streaming and studio possessions would be an attractive takeover target.”

Under the new structure for Warner Bros Discovery, the cable television service 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 separate division together with film studios, including Warner Bros Pictures and New Line Cinema.

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

“Streaming won as a habits,” stated Jonathan Miller, president of digital media investment firm Integrated Media. “Now, it’s winning as a service.”

Brightcove CEO Marc DeBevoise stated Warner Bros Discovery’s brand-new corporate structure will separate growing studio and streaming assets from rewarding but diminishing cable television business, giving a clearer financial investment image and likely setting the phase for a sale or spin-off of the cable system.

The media veteran and advisor anticipated Paramount and others may take a similar course.

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

“The question is not whether more pieces will be walked around or knocked off the board, or if further combination will occur– it refers who is the buyer and who is the seller,” .

Zaslav indicated that situation 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, unlocking to media industry debt consolidation.

Zaslav had engaged in merger talks with Paramount late last year, though a deal never ever materialized, according to a regulatory filing last month.

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

“The structure modification would make it easier for WBD to sell its linear TV networks,” eMarketer analyst Ross Benes stated, referring to the cable company. “However, finding a purchaser will be tough. The networks are in financial obligation and have no signs of growth.”

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

Today, the media business announced a multi-year offer increasing the general costs Comcast will pay to disperse 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 supplier Charter, will be a design template for future settlements with suppliers. That could assist support 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)