Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares dive 13% after reorganizing statement

Follows path taken by Comcast’s new spin-off company

*

Challenges seen in offering debt-laden linear TV networks

(New throughout, includes details, background, comments from industry experts and experts, updates share costs)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

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

Shares of Warner jumped after the business said 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 thinking about options for fading cable television businesses, a longtime cash cow where profits are deteriorating as millions of consumers embrace streaming video.

Comcast last month unveiled strategies to split most of its NBCUniversal cable networks into a new public business. The new business would be well capitalized and placed to get other cable networks if the market consolidates, one source told Reuters.

Bank of America research expert Jessica Reif Ehrlich wrote that Warner Bros Discovery’s cable tv possessions are a “extremely logical partner” for Comcast’s new spin-off company.

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

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

Under the new structure for Warner Bros Discovery, the cable 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 movie studios, including Warner Bros Pictures and New Line Cinema.

The restructuring shows an inflection point for the media market, as financial investments in streaming services such as Warner Bros Discovery’s Max are finally paying off.

“Streaming won as a behavior,” said Jonathan Miller, chief executive of digital media financial investment company Integrated Media. “Now, it’s winning as an organization.”

Brightcove CEO Marc DeBevoise said Warner Bros Discovery’s new business structure will separate growing studio and streaming assets from rewarding however diminishing cable organization, providing a clearer financial investment photo and most likely setting the phase for a sale or spin-off of the cable television unit.

The media veteran and consultant predicted Paramount and others may take a comparable course.

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

“The concern is not whether more pieces will be walked around or knocked off the board, or if more debt consolidation will happen– it refers who is the buyer and who is the seller,” wrote Fishman.

Zaslav indicated that situation during Warner Bros Discovery’s investor 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 consolidation.

Zaslav had participated in merger talks with Paramount late last year, though an offer never emerged, according to a regulatory filing last month.

Others injected a note of care, keeping in mind Warner Bros Discovery brings $40.4 billion in debt.

“The structure modification would make it easier for WBD to offer off its linear TV networks,” eMarketer analyst Ross Benes stated, referring to the cable business. “However, finding a buyer will be tough. The networks are in debt and have no signs of growth.”

In August, Warner Bros Discovery jotted down the worth of its TV assets by over $9 billion due to uncertainty around charges from cable and and sports betting rights renewals.

Today, the media company announced a multi-year offer increasing the overall fees Comcast will pay to disperse Warner Bros Discovery’s networks.

Warner Bros Discovery is sports betting the Comcast contract, together with a deal reached this year with cable television and broadband company 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)