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Shares dive 13% after reorganizing statement
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Follows course taken by Comcast's brand-new spin-off business
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Challenges seen in offering debt-laden direct TV networks
(New throughout, includes information, background, remarks 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 declining cable television TV businesses such as CNN from streaming and studio operations such as Max, laying the foundation for a potential sale or spinoff of its TV service as more cable television subscribers cut the cord.
Shares of Warner jumped after the company said the brand-new structure would be more deal friendly and it anticipated to complete the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.
Media companies are thinking about choices for fading cable businesses, a longtime money cow where revenues are wearing down as millions of customers accept streaming video.
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Comcast last month unveiled strategies to divide many of its NBCUniversal cable networks into a brand-new public business. The new business would be well capitalized and placed to get other cable networks if the market consolidates, one source told Reuters.
Bank of America research study expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable television properties are a "extremely sensible partner" for Comcast's brand-new spin-off business.
"We highly think there is potential for fairly substantial synergies if WBD's direct networks were combined with Comcast SpinCo," wrote Ehrlich, using the market term for standard television.
"Further, we think WBD's standalone streaming and studio possessions 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 a system called Global Linear Networks.
Streaming platforms Max and Discovery+ will be under a different division along with movie studios, including Warner Bros Pictures and New Line Cinema.
The restructuring reflects an inflection point for the media market, 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 company."
Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's new business structure will distinguish growing studio and streaming assets from rewarding but diminishing cable company, providing a clearer investment photo and most likely setting the stage for a sale or spin-off of the cable unit.
The media veteran and adviser anticipated Paramount and others may take a comparable path.
CEO David Zaslav, a veteran deal-maker who led Discovery through its acquisition of Scripps Networks Interactive before obtaining the even bigger target, AT&T's WarnerMedia, is placing the company for its next chess relocation, composed MoffettNathanson expert Robert Fishman.
"The concern is not whether more pieces will be walked around or knocked off the board, or if further combination will occur-- it is a matter of who is the purchaser and who is the seller," composed Fishman.
Zaslav indicated that situation throughout Warner Bros Discovery's investor 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 consolidation.
Zaslav had actually engaged in merger talks with Paramount late last year, though a deal never materialized, according to a regulatory 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 expert Ross Benes said, referring to the cable company. "However, discovering a buyer will be tough. The networks are in financial obligation and have no signs of growth."
In August, Warner Bros Discovery jotted down the worth of its TV possessions by over $9 billion due to unpredictability around charges from cable television and satellite distributors and sports betting rights renewals.
Today, the media business revealed a multi-year deal increasing the general costs Comcast will pay to disperse Warner Bros Discovery's networks.
Warner Bros Discovery is wagering the Comcast agreement, together with a deal reached this year with cable television and broadband company Charter, will be a template for future negotiations with . That could help support pricing for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles
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