Warner Bros Discovery Sets Stage For Potential Cable Deal By

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Shares jump 13% after reorganizing statement


Follows path taken by Comcast's brand-new spin-off business
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Challenges seen in selling debt-laden linear TV networks


(New throughout, includes information, background, comments from industry insiders and analysts, 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 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 subscribers cut the cable.


Shares of Warner leapt 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 considering alternatives for fading cable TV services, a longtime money cow where earnings are deteriorating as countless consumers embrace streaming video.


Comcast last month unveiled strategies to split many of its NBCUniversal cable networks into a new public business. The brand-new business would be well capitalized and positioned to obtain other cable networks if the industry combines, one source told Reuters.


Bank of America research study expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable television service properties are a "very sensible partner" for Comcast's new spin-off business.


"We highly think there is potential for relatively large synergies if WBD's linear networks were integrated with Comcast SpinCo," wrote Ehrlich, using the industry term for conventional tv.


"Further, our company believe WBD's standalone streaming and studio assets would be an attractive takeover target."


Under the new structure for Warner Bros Discovery, the cable 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.
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The restructuring reflects an inflection point for the media market, as investments in streaming services such as Warner Bros Discovery's Max are finally paying off.


"Streaming won as a habits," stated Jonathan Miller, chief executive of digital media investment firm Integrated Media. "Now, it's winning as a business."


Brightcove CEO Marc DeBevoise said Discovery's new business structure will differentiate growing studio and streaming properties from successful but shrinking cable television organization, providing a clearer investment photo and most likely setting the phase for a sale or spin-off of the cable television unit.


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


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


"The question is not whether more pieces will be walked around or knocked off the board, or if more consolidation will happen-- it is a matter of who is the buyer and who is the seller," wrote Fishman.


Zaslav signified that scenario during Warner Bros Discovery's financier call last month. He said he prepared for President-elect Donald Trump's administration would be friendlier to deal-making, opening the door to media industry debt consolidation.


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


Others injected a note of caution, noting Warner Bros Discovery carries $40.4 billion in financial obligation.
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"The structure modification would make it much easier for WBD to sell its direct TV networks," eMarketer analyst Ross Benes stated, describing the cable television business. "However, discovering a buyer will be difficult. The networks owe money and have no signs of development."


In August, Warner Bros Discovery documented the worth of its TV assets by over $9 billion due to unpredictability around fees from cable television and satellite distributors and sports betting rights renewals.
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Today, the media company announced a multi-year offer increasing the overall charges Comcast will pay to disperse Warner Bros Discovery's networks.


Warner Bros Discovery is wagering the Comcast contract, together with a deal reached this year with cable television and broadband provider Charter, will be a design template for future negotiations with suppliers. That could assist support 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)