Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares dive 13% after reorganizing announcement


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


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


Media companies are thinking about alternatives for fading cable companies, a longtime golden goose where earnings are eroding as millions of customers embrace streaming video.


Comcast last month revealed strategies to divide most of its NBCUniversal cable networks into a brand-new public business. The new company would be well capitalized and positioned to acquire 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 television service assets are a "extremely sensible partner" for Comcast's brand-new spin-off company.


"We strongly think there is potential for fairly large synergies if WBD's direct networks were combined with Comcast SpinCo," composed Ehrlich, utilizing the market term for conventional tv.


"Further, our company believe WBD's standalone streaming and studio possessions would be an appealing takeover target."


Under the brand-new structure for Warner Bros Discovery, the cable television company 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 along with movie studios, consisting of Warner Bros Pictures and New Line Cinema.


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


"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 new corporate structure will distinguish growing studio and streaming properties from profitable however shrinking cable television service, giving a clearer financial investment photo and likely setting the stage for a sale or spin-off of the cable system.


The media veteran and consultant forecasted 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 getting the even larger target, AT&T's WarnerMedia, is placing the company for its next chess relocation, wrote MoffettNathanson expert Robert Fishman.


"The question is not whether more pieces will be moved or knocked off the board, or if additional consolidation will take place-- it is a matter of 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 expected President-elect Donald Trump's administration would be friendlier to deal-making, unlocking to media market consolidation.


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


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


"The structure modification would make it simpler for WBD to sell its direct TV networks," eMarketer analyst Ross Benes said, referring to the cable business. "However, discovering a buyer will be difficult. The networks owe money and have no signs of growth."


In August, Warner Bros Discovery composed down the worth of its TV properties by over $9 billion due to unpredictability around charges from cable television and satellite suppliers and sports betting rights renewals.


Today, the media company revealed a multi-year deal increasing the total charges 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 provider Charter, will be a design template for future negotiations with distributors. That might assist support 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)