Shares jump 13% after reorganizing announcement
Follows path taken by Comcast's new spin-off company
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Challenges seen in offering debt-laden direct TV networks
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(New throughout, adds details, background, remarks from industry insiders and analysts, 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 TV businesses such as CNN from streaming and studio operations such as Max, laying the for a potential sale or spinoff of its TV business as more cable subscribers cut the cable.
Shares of Warner jumped after the company stated the 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 considering alternatives for fading cable television TV services, a long time golden goose where profits are wearing down as countless consumers welcome streaming video.
Comcast last month revealed plans to divide the majority of its NBCUniversal cable networks into a new public company. The new company would be well capitalized and positioned to acquire other cable television networks if the industry consolidates, one source informed Reuters.
Bank of America research analyst Jessica Reif Ehrlich wrote that Warner Bros Discovery's cable television possessions are a "extremely sensible partner" for Comcast's brand-new spin-off business.
"We highly believe there is capacity for fairly substantial synergies if WBD's linear networks were integrated with Comcast SpinCo," composed Ehrlich, using the market term for standard television.
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"Further, our company believe WBD's standalone streaming and studio possessions would be an attractive takeover target."
Under the new structure for Warner Bros Discovery, the cable television organization 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 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 investments in streaming services such as Warner Bros Discovery's Max are lastly settling.
"Streaming won as a habits," stated Jonathan Miller, primary executive of digital media financial investment company Integrated Media. "Now, it's winning as a business."
Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's brand-new business structure will separate growing studio and streaming properties from successful however shrinking cable business, offering a clearer financial investment image 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 may take a similar path.
CEO David Zaslav, a veteran deal-maker who led Discovery through its acquisition of Scripps Networks Interactive before obtaining the even bigger target, AT&T's WarnerMedia, is placing the company for its next chess move, wrote MoffettNathanson analyst Robert Fishman.
"The concern is not whether more pieces will be moved or knocked off the board, or if more consolidation will happen-- it refers who is the purchaser and who is the seller," wrote Fishman.
Zaslav signaled that situation throughout Warner Bros Discovery's financier call last month. He said he expected President-elect Donald Trump's administration would be friendlier to deal-making, unlocking to media market consolidation.
Zaslav had engaged 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 financial obligation.
"The structure change would make it much easier for WBD to sell its linear TV networks," eMarketer expert Ross Benes stated, describing the cable television service. "However, discovering a buyer will be difficult. The networks owe money and have no signs of development."
In August, Warner Bros Discovery documented the value of its TV possessions by over $9 billion due to uncertainty around charges from cable television and satellite suppliers and sports betting rights renewals.
This week, the media business announced a multi-year offer increasing the overall fees Comcast will pay to disperse Warner Bros Discovery's networks.
Warner Bros Discovery is wagering the Comcast contract, together with a deal reached this year with cable television and broadband company Charter, will be a design template for future negotiations with distributors. That could help support rates for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles
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