Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares dive 13% after reorganizing statement

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

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Challenges seen in selling debt-laden direct TV networks

(New throughout, includes information, background, remarks from market insiders and experts, updates share costs)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) – Warner Bros Discovery on Thursday decided to separate its declining cable television TV businesses such as CNN from streaming and studio operations such as Max, preparing for a potential sale or spinoff of its TV service as more cable subscribers cut the cord.

Shares of Warner jumped after the company said the brand-new structure would be more deal friendly and it anticipated to complete the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.

Media companies are considering alternatives for fading cable television services, a long time golden goose where profits are wearing down as millions of consumers welcome streaming video.

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

Bank of America research study expert Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable assets are a “very sensible partner” for Comcast’s new spin-off company.

“We strongly believe there is capacity for fairly large synergies if WBD’s direct networks were combined with Comcast SpinCo,” wrote Ehrlich, utilizing the market term for standard tv.

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

Under the new structure for Warner Bros Discovery, the cable 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 separate department along with movie studios, consisting of 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 habits,” said Jonathan Miller, chief executive of digital media investment firm Integrated Media. “Now, it’s winning as an organization.”

Brightcove CEO Marc DeBevoise said Warner Bros Discovery’s brand-new corporate structure will distinguish growing studio and streaming assets from successful but shrinking cable TV organization, offering a clearer investment photo and likely setting the stage for a sale or spin-off of the unit.

The media veteran and adviser predicted Paramount and others may 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 larger target, AT&T’s WarnerMedia, is placing the company for its next chess relocation, composed MoffettNathanson expert Robert Fishman.

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

Zaslav signaled that circumstance during Warner Bros Discovery’s financier call last month. He stated he prepared for President-elect Donald Trump’s administration would be friendlier to deal-making, opening the door to media industry debt consolidation.

Zaslav had taken part in merger talks with Paramount late in 2015, though an offer never materialized, according to a regulatory filing last month.

Others injected a note of care, noting Warner Bros Discovery brings $40.4 billion in financial obligation.

“The structure change would make it simpler for WBD to sell off its linear TV networks,” eMarketer expert Ross Benes said, describing the cable service. “However, discovering a purchaser will be challenging. The networks owe money and have no indications of growth.”

In August, Warner Bros Discovery documented the value of its TV assets by over $9 billion due to uncertainty around fees from cable and satellite suppliers and sports betting rights renewals.

Today, the media business announced a multi-year deal increasing the general charges Comcast will pay to disperse Warner Bros Discovery’s networks.

Warner Bros Discovery is sports betting the Comcast arrangement, together with an offer reached this year with cable television and broadband provider Charter, will be a design template for future negotiations with distributors. That could help 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)