Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares dive 13% after restructuring announcement

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

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Challenges seen in offering debt-laden linear TV networks

(New throughout, adds details, background, remarks from market insiders and experts, 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 television services 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 business said the brand-new structure would be more deal friendly and it anticipated to finish the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.

Media companies are considering options for fading cable television organizations, a longtime golden goose where incomes are wearing down as millions of customers accept streaming video.

Comcast last month unveiled plans to divide most of its NBCUniversal cable networks into a new public company. The new company would be well capitalized and positioned to obtain other cable television networks if the market consolidates, one source told Reuters.

Bank of America research study analyst Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable tv properties are a “very rational partner” for Comcast’s new spin-off company.

“We strongly believe there is capacity for relatively large synergies if WBD’s linear networks were combined with Comcast SpinCo,” wrote Ehrlich, using the industry term for traditional tv.

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

Under the new structure for Warner Bros Discovery, the cable TV organization including TNT, and CNN will be housed in an unit called Global Linear Networks.

Streaming platforms Max and Discovery+ will be under a separate division in addition to movie 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 behavior,” said Jonathan Miller, primary executive of digital media financial investment business Integrated Media. “Now, it’s winning as a service.”

Brightcove CEO Marc DeBevoise said Warner Bros Discovery’s brand-new corporate structure will separate growing studio and streaming assets from successful however shrinking cable business, providing a clearer investment picture and most likely setting the stage for a sale or spin-off of the cable television unit.

The media veteran and adviser predicted Paramount and others may take a comparable path.

CEO David Zaslav, a veteran deal-maker who led Discovery through its acquisition of Scripps Networks Interactive before obtaining 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 moved or knocked off the board, or if additional debt consolidation will take place– it is a matter of who is the buyer and who is the seller,” composed Fishman.

Zaslav signaled that circumstance throughout Warner Bros Discovery’s financier call last month. He stated he anticipated President-elect Donald Trump’s administration would be friendlier to deal-making, opening the door to media industry debt consolidation.

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

Others injected a note of caution, noting Warner Bros Discovery carries $40.4 billion in debt.

“The structure modification would make it easier for WBD to sell its linear TV networks,” eMarketer expert Ross Benes stated, referring to the cable TV service. “However, finding a purchaser will be difficult. The networks owe money and have no indications of development.”

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

Today, the media company revealed a multi-year offer increasing the overall costs 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 company Charter, will be a template for future settlements with suppliers. That could 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)