Warner Bros Discovery Sets Stage For Potential Cable Deal By
Shares jump 13% after restructuring statement
Follows path taken by Comcast’s new spin-off company
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Challenges seen in selling debt-laden linear TV networks
(New throughout, adds information, background, comments from industry experts and experts, updates share prices)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
Dec 12 (Reuters) – Warner Bros Discovery on Thursday chose to separate its declining cable television services such as CNN from streaming and studio operations such as Max, preparing for a prospective sale or spinoff of its TV company as more cable customers cut the cable.
Shares of Warner leapt after the business stated the new structure would be more deal friendly and it 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 organizations, a longtime money cow where profits are eroding as countless consumers welcome streaming video.
Comcast last month unveiled strategies to split most of its NBCUniversal cable television networks into a new public company. The brand-new company would be well capitalized and positioned to obtain other cable television networks if the industry combines, one source informed Reuters.
Bank of America research study expert Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable possessions are a “really logical partner” for Comcast’s new spin-off company.
“We strongly think there is capacity for relatively substantial synergies if WBD’s direct networks were combined with Comcast SpinCo,” composed Ehrlich, using the market term for traditional television.
“Further, our company believe WBD’s standalone streaming and studio properties would be an appealing takeover target.”
Under the brand-new structure for Warner Bros Discovery, the cable television service 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 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, president of digital media investment business Integrated Media. “Now, it’s winning as a company.”
Brightcove CEO Marc DeBevoise said Warner Bros Discovery’s brand-new business structure will distinguish growing studio and streaming properties from profitable but shrinking cable television organization, offering a clearer financial investment image and likely setting the phase for a sale or spin-off of the cable television unit.
The media veteran and adviser forecasted Paramount and others might take a similar path.
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 placing the business for its next chess move, wrote MoffettNathanson analyst Robert Fishman.
“The question is not whether more pieces will be moved around or knocked off the board, or if additional debt consolidation will take place– it is a matter of who is the purchaser and who is the seller,” wrote Fishman.
Zaslav signified that situation throughout Warner Bros Discovery’s investor call last month. He said he anticipated President-elect Donald Trump’s administration would be friendlier to deal-making, unlocking to media industry consolidation.
Zaslav had actually taken part in merger talks with Paramount late last year, though an offer never materialized, according to a regulatory filing last month.
Others injected a note of care, keeping in mind Warner Bros Discovery brings $40.4 billion in financial obligation.
“The structure change would make it much easier for WBD to sell its direct TV networks,” eMarketer analyst Ross Benes said, referring to the cable television company. “However, finding a buyer will be challenging. The networks are in debt and have no indications of growth.”
In August, Warner Bros Discovery jotted down the value of its TV possessions by over $9 billion due to uncertainty around charges from cable television and satellite distributors and sports betting rights renewals.
Today, the media business announced a multi-year deal increasing the general costs 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 and broadband provider Charter, will be a design template for future settlements with distributors. That might help 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)
