Warner Bros Discovery Sets Stage For Potential Cable Deal By

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Shares dive 13% after reorganizing announcement

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Shares jump 13% after reorganizing announcement


Follows path taken by Comcast's 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 insiders and experts, 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 TV organizations such as CNN from streaming and studio operations such as Max, preparing for a prospective sale or spinoff of its TV business as more cable television customers cut the cord.


Shares of Warner jumped after the company 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 companies are considering choices for fading cable television services, a long time cash cow where profits are eroding as countless customers welcome streaming video.


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

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


"We strongly believe there is capacity for relatively sizable synergies if WBD's direct networks were combined with Comcast SpinCo," composed Ehrlich, using the market term for traditional tv.


"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 television service 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 different department together with film studios, including 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 behavior," stated Jonathan Miller, chief executive of digital media investment company Integrated Media. "Now, it's winning as a company."


Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's new corporate structure will distinguish growing studio and streaming assets from rewarding however diminishing cable TV service, offering a clearer investment picture and likely setting the phase for a sale or spin-off of the cable system.

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The media veteran and adviser predicted Paramount and others might take a comparable course.


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


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

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


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


Others injected a note of care, noting Warner Bros Discovery carries $40.4 billion in debt.


"The structure modification would make it simpler for WBD to sell its linear TV networks," eMarketer analyst Ross Benes stated, referring to the cable organization. "However, discovering a purchaser will be challenging. The networks are in financial obligation 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 uncertainty around fees from cable television and satellite suppliers and sports betting rights renewals.


Today, the media company announced 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 arrangement, together with an offer reached this year with cable and broadband supplier Charter, will be a design template for future negotiations with distributors. That might help support 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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