Warner Bros Discovery Sets Stage For Potential Cable Deal By
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Shares dive 13% after reorganizing statement
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Follows course taken by Comcast's new spin-off company
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Challenges seen in offering debt-laden direct TV networks
(New throughout, adds information, 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 services such as CNN from streaming and studio operations such as Max, laying the foundation for a possible sale or spinoff of its TV service as more cable subscribers cut the cable.
Shares of Warner jumped after the business stated the new structure would be more deal friendly and it anticipated to finish 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 companies, a long time golden goose where profits are eroding as millions of consumers welcome streaming video.
Comcast last month revealed plans to split many of its NBCUniversal cable television networks into a new public company. The new company would be well capitalized and placed to acquire other cable networks if the market consolidates, one source informed Reuters.
Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable tv properties are a "really rational partner" for Comcast's new spin-off company.
"We highly believe there is potential for fairly large synergies if WBD's linear networks were integrated with Comcast SpinCo," wrote Ehrlich, utilizing the industry term for traditional television.
"Further, we believe WBD's standalone streaming and studio possessions would be an appealing takeover target."
Under the new structure for Warner Bros Discovery, the cable television TV company 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 different department in addition to film studios, consisting of Warner Bros Pictures and New Line Cinema.
The restructuring reflects 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, primary executive of digital media investment firm Integrated Media. "Now, it's winning as a business."
Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's brand-new corporate structure will distinguish growing studio and streaming assets from successful however business, offering a clearer financial investment image and likely setting the phase for a sale or spin-off of the cable system.
The media veteran and consultant forecasted Paramount and others might take a similar 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 business for its next chess relocation, composed MoffettNathanson expert Robert Fishman.
"The concern is not whether more pieces will be moved around or knocked off the board, or if further consolidation will take place-- it is a matter of who is the buyer and who is the seller," composed Fishman.
Zaslav signified 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 actually participated in merger talks with Paramount late last year, though a deal never ever emerged, according to a regulatory filing last month.
Others injected a note of caution, noting Warner Bros Discovery brings $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, finding a buyer will be difficult. The networks are in financial obligation and have no signs of development."
In August, Warner Bros Discovery documented the value of its TV properties by over $9 billion due to unpredictability around charges from cable and satellite distributors and sports betting rights renewals.
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Today, the media business announced a multi-year deal increasing the total fees 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 provider Charter, will be a design template for future settlements with suppliers. 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)
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