Warner Bros Discovery Sets Stage For Potential Cable Deal By

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Shares jump 13% after reorganizing announcement


Follows path 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 experts and analysts, updates share prices)


By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni


Dec 12 (Reuters) - Warner Bros Discovery on Thursday chose to separate its decreasing cable organizations such as CNN from streaming and studio operations such as Max, laying the foundation for a prospective sale or spinoff of its TV company as more cable subscribers cut the cord.


Shares of Warner leapt after the company said the brand-new structure would be more deal friendly and it anticipated to finish the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.


Media business are thinking about alternatives for fading cable television companies, a longtime money cow where profits are wearing down as millions of consumers embrace streaming video.


Comcast last month revealed plans to split the majority of its NBCUniversal cable networks into a new public company. The new business would be well capitalized and positioned to get other cable networks if the industry combines, one source told Reuters.


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


"We strongly believe there is capacity for fairly large synergies if WBD's direct networks were combined with Comcast SpinCo," wrote Ehrlich, utilizing the industry term for conventional tv.


"Further, we think WBD's standalone streaming and studio properties would be an attractive takeover target."


Under the brand-new structure for Warner Bros Discovery, the cable television 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 in addition to film studios, consisting of Warner Bros Pictures and New Line Cinema.


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 financial investment business Integrated Media. "Now, it's winning as an organization."


Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's new business structure will separate growing studio and streaming possessions from lucrative however diminishing cable television TV service, providing a clearer investment picture and likely setting the stage for a sale or spin-off of the cable television system.


The media veteran and adviser forecasted 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 getting the even bigger target, AT&T's WarnerMedia, is positioning the business for its next chess relocation, wrote MoffettNathanson expert Robert Fishman.


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


Zaslav signified that situation throughout Warner Bros Discovery's financier call last month. He stated he prepared for President-elect Donald would be friendlier to deal-making, unlocking to media industry combination.


Zaslav had engaged in merger talks with Paramount late last year, though an offer never emerged, according to a regulative filing last month.
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Others injected a note of caution, keeping in mind Warner Bros Discovery carries $40.4 billion in financial obligation.


"The structure modification would make it simpler for WBD to sell off its linear TV networks," eMarketer analyst Ross Benes stated, describing the cable company. "However, finding a purchaser will be challenging. The networks owe money and have no indications of growth."


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


This week, the media business announced a multi-year offer increasing the total charges Comcast will pay to disperse 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 provider Charter, will be a 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)