Warner Bros Discovery Sets Stage For Potential Cable Deal By
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Shares dive 13% after restructuring statement
Follows course 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, includes details, background, comments from industry insiders and analysts, updates share rates)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
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Dec 12 (Reuters) - Warner Bros Discovery on Thursday decided to separate its decreasing cable television companies such as CNN from streaming and studio operations such as Max, preparing for a potential sale or spinoff of its TV company as more cable television subscribers cut the cable.
Shares of Warner jumped after the business stated 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 considering alternatives for fading cable TV businesses, a longtime cash cow where earnings are eroding as millions of customers embrace streaming video.
Comcast last month revealed strategies to split most of its NBCUniversal cable networks into a new public company. The new business would be well capitalized and placed to obtain other cable television networks if the market consolidates, one source told Reuters.
Bank of America research analyst Jessica Reif Ehrlich wrote that Warner Bros Discovery's assets are a "extremely sensible partner" for Comcast's brand-new spin-off business.
"We strongly believe there is potential for relatively sizable synergies if WBD's linear networks were combined with Comcast SpinCo," composed Ehrlich, using the market term for standard tv.
"Further, we think WBD's standalone streaming and studio possessions would be an attractive takeover target."
Under the brand-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.
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Streaming platforms Max and Discovery+ will be under a separate division along with movie studios, including Warner Bros Pictures and New Line Cinema.
The restructuring shows an inflection point for the media industry, as financial investments in streaming services such as Warner Bros Discovery's Max are finally settling.
"Streaming won as a habits," stated Jonathan Miller, president of digital media investment firm Integrated Media. "Now, it's winning as a service."
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Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's brand-new corporate structure will differentiate growing studio and streaming properties from rewarding but diminishing cable TV business, providing a clearer investment image and likely setting the stage for a sale or spin-off of the cable system.
The media veteran and advisor anticipated 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 bigger target, AT&T's WarnerMedia, is placing the company for its next chess relocation, composed MoffettNathanson analyst Robert Fishman.
"The concern is not whether more pieces will be moved or knocked off the board, or if further combination will take place-- it is a matter of who is the buyer and who is the seller," composed Fishman.
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Zaslav signaled that situation throughout 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, unlocking to media industry debt consolidation.
Zaslav had actually taken part in merger talks with Paramount late last year, though an offer never emerged, according to a regulative 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 sell off its linear TV networks," eMarketer expert Ross Benes stated, referring to the cable television business. "However, discovering a purchaser will be tough. The networks are in debt and have no signs of growth."
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In August, Warner Bros Discovery made a note of the worth of its TV possessions by over $9 billion due to unpredictability around charges from cable television and satellite suppliers and sports betting rights renewals.
This week, the media company revealed a multi-year deal increasing the overall charges Comcast will pay to distribute Warner Bros Discovery's networks.
Warner Bros Discovery is wagering the Comcast arrangement, together with an offer reached this year with cable and broadband company Charter, will be a template for future settlements with distributors. That could help support 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)