Warner Bros Discovery Sets Stage For Potential Cable Deal By

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Shares jump 13% after reorganizing statement


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


(New throughout, includes information, background, comments from market experts and analysts, updates share prices)


By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni


Dec 12 (Reuters) - Warner Bros Discovery on Thursday decided to separate its declining cable television businesses such as CNN from streaming and studio operations such as Max, preparing for a prospective sale or spinoff of its TV organization as more cable customers cut the cable.


Shares of Warner jumped after the company 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 options for fading cable television companies, a longtime golden goose where profits are deteriorating as countless customers embrace streaming video.


Comcast last month revealed strategies to split the majority of its NBCUniversal cable television networks into a new public business. The new business would be well capitalized and placed to obtain other cable television networks if the industry combines, one source informed Reuters.


Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable tv possessions are a "extremely rational partner" for Comcast's brand-new spin-off business.


"We highly think there is potential for fairly substantial synergies if WBD's linear networks were integrated with Comcast SpinCo," wrote Ehrlich, using the market term for standard television.


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


Under the brand-new structure for Warner Bros Discovery, the cable organization 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 separate division along with movie studios, including 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 finally settling.


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


Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's brand-new corporate structure will separate growing studio and streaming properties from lucrative but diminishing cable service, offering a clearer investment photo and likely setting the phase for a sale or spin-off of the cable system.


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 the even bigger target, AT&T's WarnerMedia, is placing the company for its next chess move, wrote MoffettNathanson expert Robert Fishman.


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


Zaslav signified that situation during Warner Bros Discovery's investor call last month. He stated he expected President-elect Donald Trump's administration would be friendlier to deal-making, unlocking to media market consolidation.


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


Others injected a note of caution, keeping in mind Warner Bros Discovery brings $40.4 billion in financial obligation.


"The structure modification would make it much easier for WBD to sell its linear TV networks," eMarketer analyst Ross Benes said, referring to the cable television company. "However, finding a buyer will be difficult. The networks are in debt and have no signs of development."


In August, Warner Bros Discovery wrote down the value of its TV properties by over $9 billion due to unpredictability around fees from cable and satellite suppliers and sports betting rights renewals.
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This week, the media business announced a multi-year deal increasing the general charges Comcast will pay to distribute Warner Bros Discovery's networks.


Warner Bros Discovery is sports betting the Comcast arrangement, together with an offer reached this year with cable television and broadband supplier Charter, will be a design template for future negotiations with distributors. That might assist stabilize 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)
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