Shares jump 13% after reorganizing announcement
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Follows path 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, comments from industry experts 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 services such as CNN from streaming and studio operations such as Max, preparing for a prospective sale or spinoff of its TV service as more cable customers cut the cable.
Shares of Warner jumped after the company said the brand-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 options for fading cable TV services, a longtime cash cow where earnings are wearing down as countless customers embrace streaming video.
Comcast last month unveiled strategies to divide many of its NBCUniversal cable networks into a brand-new public company. The new company would be well capitalized and placed to obtain other cable networks if the market combines, one source told Reuters.
Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable television service assets are a "extremely sensible partner" for Comcast's new spin-off company.
"We highly believe there is capacity for relatively sizable synergies if WBD's linear networks were integrated with Comcast SpinCo," composed Ehrlich, utilizing the industry term for standard television.
"Further, our company believe WBD's standalone streaming and studio properties would be an appealing takeover target."
Under the new structure for Warner Bros Discovery, the cable television 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 separate division together with film studios, including Warner Bros Pictures and New Line Cinema.
The restructuring reflects an inflection point for the media industry, as 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 an organization."
Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's brand-new business structure will separate growing studio and streaming possessions from lucrative but diminishing cable service, offering a clearer investment picture and most likely setting the phase for a sale or spin-off of the cable television system.
The media veteran and adviser predicted Paramount and others might take a similar path.
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 positioning the business for its next chess move, composed MoffettNathanson expert Robert Fishman.
"The question is not whether more pieces will be walked around or knocked off the board, or if more consolidation will take place-- it refers who is the buyer and who is the seller," composed Fishman.
Zaslav signified that scenario throughout Warner Bros Discovery's investor call last month. He said he anticipated President-elect Donald Trump's administration would be friendlier to deal-making, unlocking to media market consolidation.
Zaslav had actually participated in merger talks with Paramount late in 2015, though a deal never emerged, according to a regulative filing last month.
Others injected a note of caution, 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 off its direct TV networks," eMarketer analyst Ross Benes stated, describing the cable television business. "However, discovering a buyer will be difficult. The networks owe money and have no indications of development."
In August, Warner Bros Discovery wrote down the value of its TV properties by over $9 billion due to uncertainty around fees from cable television and satellite suppliers and sports betting rights renewals.
This week, the media company 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 contract, together with an offer reached this year with cable and broadband supplier Charter, will be a design template for future negotiations with distributors. That might assist support prices for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles
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