Warner Bros Discovery Sets Stage For Potential Cable Deal By

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Shares jump 13% after reorganizing statement
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Follows path taken by Comcast's brand-new spin-off business


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Challenges seen in offering debt-laden direct TV networks


(New throughout, adds information, background, comments from industry insiders and experts, updates share rates)


By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
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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, laying the foundation for a prospective sale or spinoff of its TV business as more cable subscribers cut the cable.


Shares of Warner jumped after the business stated the brand-new structure would be more deal friendly and it expected to finish 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 television TV companies, a long time money cow where revenues are deteriorating as millions of consumers accept streaming video.


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


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


"We strongly think there is capacity for fairly substantial synergies if WBD's linear networks were combined with Comcast SpinCo," composed Ehrlich, utilizing the market term for standard television.


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


Under the brand-new structure for Warner Bros Discovery, the cable company consisting of 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 movie studios, consisting of Warner Bros Pictures and New Line Cinema.


The restructuring reflects 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 habits," said Jonathan Miller, primary executive of digital media financial investment company Integrated Media. "Now, it's winning as a business."
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Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's brand-new corporate structure will separate growing studio and streaming assets from rewarding however shrinking cable TV organization, offering a clearer investment picture and likely setting the stage for a sale or spin-off of the cable unit.


The media veteran and adviser predicted 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 bigger target, AT&T's WarnerMedia, is positioning the for its next chess move, wrote MoffettNathanson analyst Robert Fishman.


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


Zaslav indicated that scenario throughout 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 combination.


Zaslav had engaged in merger talks with Paramount late last year, though a deal never emerged, according to a regulative 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 simpler for WBD to sell its direct TV networks," eMarketer analyst Ross Benes said, referring to the cable TV organization. "However, finding a buyer will be tough. The networks are in debt and have no indications of growth."


In August, Warner Bros Discovery composed down 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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This week, the media company announced a multi-year offer increasing the overall costs Comcast will pay to distribute Warner Bros Discovery's networks.


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