Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares jump 13% after restructuring announcement

Follows course taken by Comcast’s new spin-off business

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Challenges seen in selling debt-laden linear TV networks

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

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) – Warner Bros Discovery on Thursday decided to separate its decreasing cable television companies such as CNN from streaming and studio operations such as Max, laying the foundation for a possible sale or spinoff of its TV organization as more cable customers cut the cord.

Shares of Warner jumped after the business said the 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 considering alternatives for fading cable businesses, a longtime golden goose where profits are deteriorating as millions of customers accept streaming video.

Comcast last month revealed plans to split most of its NBCUniversal cable networks into a brand-new public company. The new would be well capitalized and placed to obtain other cable television networks if the market consolidates, one source told Reuters.

Bank of America research study analyst Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable tv possessions are a “very rational partner” for Comcast’s brand-new spin-off business.

“We highly believe there is capacity for relatively sizable synergies if WBD’s direct networks were integrated with Comcast SpinCo,” composed Ehrlich, utilizing the industry term for standard tv.

“Further, we think WBD’s standalone streaming and studio properties would be an appealing takeover target.”

Under the new structure for Warner Bros Discovery, the cable TV 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 different division in addition to movie studios, consisting of 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 lastly settling.

“Streaming won as a habits,” said Jonathan Miller, president of digital media investment firm Integrated Media. “Now, it’s winning as a service.”

Brightcove CEO Marc DeBevoise stated Warner Bros Discovery’s new business structure will separate growing studio and streaming assets from profitable however shrinking cable TV business, providing a clearer financial investment photo and most likely setting the stage for a sale or spin-off of the cable unit.

The media veteran and advisor 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 acquiring the even bigger target, AT&T’s WarnerMedia, is positioning the business for its next chess move, wrote MoffettNathanson expert Robert Fishman.

“The concern is not whether more pieces will be moved or knocked off the board, or if more combination will occur– it refers who is the buyer and who is the seller,” wrote Fishman.

Zaslav indicated that situation throughout Warner Bros Discovery’s investor call last month. He said he expected President-elect Donald Trump’s administration would be friendlier to deal-making, opening the door to media market debt consolidation.

Zaslav had engaged in merger talks with Paramount late in 2015, though a deal never emerged, according to a regulatory filing last month.

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 offer off its direct TV networks,” eMarketer expert Ross Benes stated, referring to the cable business. “However, discovering a purchaser will be difficult. The networks are in debt and have no indications of development.”

In August, Warner Bros Discovery jotted 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.

Today, the media business revealed a multi-year deal increasing the total charges Comcast will pay to distribute Warner Bros Discovery’s networks.

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