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Shares jump 13% after reorganizing announcement
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Follows path taken by Comcast's new spin-off company
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Challenges seen in selling debt-laden linear TV networks
(New throughout, adds details, background, comments from market experts and experts, updates share rates)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
Dec 12 (Reuters) - Warner Bros Discovery on Thursday chose to separate its decreasing cable television TV businesses such as CNN from streaming and studio operations such as Max, preparing for a possible sale or spinoff of its TV service as more cable subscribers cut the cable.
Shares of Warner jumped after the business stated 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 thinking about choices for fading cable television organizations, a long time golden goose where earnings are eroding as millions of consumers embrace streaming video.
Comcast last month unveiled plans to split the majority of its NBCUniversal cable networks into a brand-new public company. The new business would be well capitalized and placed to acquire other cable networks if the industry consolidates, one source told Reuters.
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Bank of America research study analyst Jessica Reif Ehrlich wrote that Warner Bros Discovery's cable television properties are a "very rational partner" for Comcast's new spin-off company.
"We strongly believe there is capacity for fairly substantial synergies if WBD's linear networks were integrated with Comcast SpinCo," composed Ehrlich, utilizing the industry term for standard tv.
"Further, our company believe WBD's standalone streaming and studio assets would be an appealing takeover target."
Under the brand-new structure for Warner Bros Discovery, the cable service including TNT, Animal Planet and CNN will be housed in an unit called Global Linear Networks.
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Streaming platforms Max and Discovery+ will be under a separate department together with film studios, consisting of Warner Bros Pictures and New Line Cinema.
The restructuring shows 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 behavior," stated Jonathan Miller, president of digital media investment business Integrated Media. "Now, it's winning as a service."
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Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's brand-new corporate structure will differentiate growing studio and streaming possessions from profitable but diminishing cable television TV organization, giving a clearer financial investment picture and likely setting the stage for a sale or spin-off of the cable television system.
The media veteran and adviser predicted Paramount and others may take a similar path.
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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 analyst Robert Fishman.
"The concern is not whether more pieces will be walked around or knocked off the board, or if more debt consolidation will happen-- it is a matter of who is the buyer and who is the seller," wrote Fishman.
Zaslav signaled that scenario during Warner Bros Discovery's 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 combination.
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Zaslav had actually taken part in merger talks with Paramount late in 2015, though a deal never materialized, according to a regulative filing last month.
Others injected a note of caution, noting Warner Bros Discovery brings $40.4 billion in debt.
"The structure change would make it simpler for WBD to offer off its direct TV networks," eMarketer analyst Ross Benes said, describing the cable television organization. "However, finding a purchaser will be challenging. The networks are in financial obligation and have no signs of development."
In August, Warner Bros Discovery made a note of 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.
This week, the media company announced a multi-year deal increasing the total charges Comcast will pay to distribute Warner Bros Discovery's networks.
Warner Bros Discovery is sports betting the Comcast agreement, together with an offer reached this year with cable and broadband service provider Charter, will be a template for future negotiations with distributors. That could help support prices for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles
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