Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares jump 13% after restructuring statement

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 details, background, comments from industry experts and experts, updates share rates)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) – Warner Bros Discovery on Thursday decided to separate its decreasing cable TV companies such as CNN from streaming and studio operations such as Max, laying the groundwork for a prospective sale or spinoff of its TV business 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 anticipated to finish the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.

Media business are thinking about alternatives for fading cable TV services, a long time golden goose where revenues are deteriorating as countless consumers welcome streaming video.

Comcast last month revealed plans to divide many of its NBCUniversal cable television networks into a new public business. The brand-new company would be well capitalized and placed to acquire other cable television networks if the market consolidates, one source told Reuters.

Bank of America research analyst Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable television assets are a “really logical partner” for Comcast’s new spin-off company.

“We strongly believe there is capacity for relatively substantial synergies if WBD’s linear networks were combined with Comcast SpinCo,” composed Ehrlich, using the industry term for standard tv.

“Further, our company believe WBD’s standalone streaming and studio properties would be an attractive takeover target.”

Under the new structure for Discovery, the cable business 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 department together with movie studios, consisting of Warner Bros Pictures and New Line Cinema.

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

“Streaming won as a behavior,” stated Jonathan Miller, president of digital media financial investment company Integrated Media. “Now, it’s winning as a service.”

Brightcove CEO Marc DeBevoise stated Warner Bros Discovery’s brand-new business structure will distinguish growing studio and streaming properties from profitable but diminishing cable television company, giving a clearer financial investment photo and most likely setting the phase for a sale or spin-off of the cable unit.

The media veteran and advisor forecasted Paramount and others might take a comparable course.

CEO David 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 placing the company for its next chess move, wrote MoffettNathanson analyst 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 indicated that circumstance during Warner Bros Discovery’s investor call last month. He said he prepared for President-elect Donald Trump’s administration would be friendlier to deal-making, unlocking to media market consolidation.

Zaslav had participated in merger talks with Paramount late last year, though an offer never materialized, according to a regulative filing last month.

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

“The structure change would make it easier for WBD to offer off its linear TV networks,” eMarketer analyst Ross Benes said, describing the cable television TV service. “However, finding a buyer will be tough. The networks are in debt and have no signs of development.”

In August, Warner Bros Discovery made a note of the worth of its TV properties by over $9 billion due to uncertainty around charges from cable and satellite suppliers and sports betting rights renewals.

Today, the media business announced a multi-year offer increasing the general charges Comcast will pay to distribute Warner Bros Discovery’s networks.

Warner Bros Discovery is wagering the Comcast agreement, 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 rates 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)