Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares dive 13% after restructuring announcement
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Follows course taken by Comcast's new spin-off company


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Challenges seen in offering debt-laden direct TV networks


(New throughout, includes details, background, remarks from industry insiders and experts, updates share costs)


By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni


Dec 12 (Reuters) - Warner Bros Discovery on Thursday chose to separate its decreasing cable businesses such as CNN from streaming and studio operations such as Max, laying the foundation for a prospective sale or spinoff of its TV organization as more cable customers cut the cord.
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Shares of Warner leapt after the business 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 companies are considering choices for fading cable television TV services, a long time cash cow where profits are wearing down as millions of consumers embrace streaming video.


Comcast last month unveiled plans to split the majority of its NBCUniversal cable networks into a new public business. The new company would be well capitalized and positioned to obtain other cable television networks if the industry combines, one source told Reuters.
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Bank of America research study analyst Jessica Reif Ehrlich composed that Warner Bros Discovery's cable television service assets are a "very logical partner" for Comcast's new spin-off company.


"We highly think there is potential for fairly substantial synergies if WBD's direct networks were integrated with Comcast SpinCo," wrote Ehrlich, utilizing the industry term for standard tv.


"Further, our company believe WBD's standalone streaming and studio possessions would be an appealing takeover target."
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Under the new structure for Discovery, the cable business including 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 department along with film studios, including Warner Bros Pictures and New Line Cinema.


The restructuring reflects an inflection point for the media industry, as financial investments in streaming services such as Warner Bros Discovery's Max are finally settling.
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"Streaming won as a behavior," said Jonathan Miller, president of digital media investment firm Integrated Media. "Now, it's winning as a business."


Brightcove CEO Marc DeBevoise said Warner Bros Discovery's new business structure will separate growing studio and streaming assets from successful however diminishing cable business, offering a clearer investment photo and most likely setting the stage for a sale or spin-off of the cable television system.
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The media veteran and advisor anticipated Paramount and others might take a comparable course.


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


"The question is not whether more pieces will be walked around or knocked off the board, or if additional combination will take place-- it refers who is the purchaser and who is the seller," wrote Fishman.
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Zaslav indicated that situation during Warner Bros Discovery's financier call last month. He said he expected President-elect Donald Trump's administration would be friendlier to deal-making, unlocking to media industry combination.


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, noting Warner Bros Discovery brings $40.4 billion in financial obligation.


"The structure modification would make it easier for WBD to offer off its direct TV networks," eMarketer expert Ross Benes stated, describing the cable TV company. "However, discovering a buyer will be challenging. The networks owe money and have no signs of growth."


In August, Warner Bros Discovery made a note of the worth of its TV possessions by over $9 billion due to uncertainty around fees from cable television and satellite suppliers and sports betting rights renewals.


This week, 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 wagering the Comcast contract, together with an offer reached this year with cable and broadband service provider Charter, will be a design template for future settlements 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; Editing by Shilpi Majumdar, Arun Koyyur, Keith Weir and David Gregorio)