Shares dive 13% after reorganizing statement
Follows course taken by Comcast's brand-new spin-off business
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Challenges seen in offering debt-laden linear TV networks
(New throughout, includes information, background, comments from industry experts 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 decreasing cable television TV services such as CNN from streaming and studio operations such as Max, preparing for a possible sale or spinoff of its TV business as more cable television customers cut the cable.
Shares of Warner jumped after the business stated the brand-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 businesses, a long time cash cow where profits are wearing down as millions of consumers accept streaming video.
Comcast last month revealed plans to split the majority of its NBCUniversal cable television networks into a new public company. The brand-new company would be well capitalized and positioned to acquire other cable television networks if the industry consolidates, one source told Reuters.
Bank of America research study analyst Jessica Reif Ehrlich wrote that Warner Bros Discovery's cable tv possessions are a "extremely logical partner" for Comcast's new spin-off company.
"We highly think there is potential for fairly sizable synergies if WBD's direct networks were integrated with Comcast SpinCo," wrote Ehrlich, utilizing the market term for standard tv.
"Further, our company 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 including TNT, Animal Planet and CNN will be housed in a system called Global Linear Networks.
Streaming platforms Max and Discovery+ will be under a separate department along with movie studios, consisting of Warner Bros Pictures and New Line Cinema.
The restructuring reflects an inflection point for the media market, as financial investments in streaming services such as Warner Bros Discovery's Max are finally paying off.
"Streaming won as a behavior," stated Jonathan Miller, chief executive of digital media financial investment company Integrated Media. "Now, it's winning as a service."
Brightcove CEO Marc DeBevoise said Warner Bros Discovery's brand-new corporate structure will distinguish growing studio and streaming possessions from rewarding but shrinking cable TV business, giving a clearer investment image and most likely setting the phase for a sale or spin-off of the cable unit.
The media veteran and adviser forecasted 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 bigger target, AT&T's WarnerMedia, is positioning the business for its next chess move, wrote MoffettNathanson analyst Robert Fishman.
"The question is not whether more pieces will be moved or knocked off the board, or if additional debt consolidation will occur-- it refers who is the purchaser and who is the seller," wrote Fishman.
Zaslav indicated that circumstance throughout Warner Bros Discovery's investor 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 consolidation.
Zaslav had actually engaged in merger talks with Paramount late last year, though an offer never emerged, according to a regulatory filing last month.
Others injected a note of caution, keeping in mind Warner Bros Discovery carries $40.4 billion in debt.
"The structure modification would make it much easier for WBD to sell its linear TV networks," eMarketer analyst Ross Benes said, describing the cable company. "However, discovering a buyer will be challenging. The networks owe money and have no indications of growth."
In August, Warner Bros Discovery jotted down the value of its TV assets by over $9 billion due to unpredictability around costs from cable and satellite distributors and sports betting rights renewals.
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Today, the media company revealed a multi-year offer increasing the general 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 and broadband supplier Charter, will be a design template for future negotiations with distributors. That could assist stabilize pricing for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles
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