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Shares jump 13% after restructuring announcement
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Follows path taken by Comcast’s brand-new spin-off company

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Challenges seen in offering debt-laden linear TV networks

(New throughout, adds details, 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 chose to separate its decreasing cable television services such as CNN from streaming and studio operations such as Max, preparing for a potential sale or spinoff of its TV service as more cable subscribers cut the cord.

Shares of Warner jumped after the 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 business are thinking about choices for fading cable television TV businesses, a longtime golden goose where incomes are eroding as countless consumers accept streaming video.

Comcast last month revealed plans to split the majority of its NBCUniversal cable networks into a new public business. The new company would be well capitalized and positioned to get other cable networks if the market combines, one source told Reuters.

Bank of America research analyst Jessica Reif Ehrlich wrote that Warner Bros Discovery’s cable tv possessions are a “really sensible partner” for Comcast’s new spin-off company.

“We highly believe there is potential for fairly large 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 TV 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 different division together with movie studios, consisting of 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 paying off.

“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 corporate structure will differentiate growing studio and streaming assets from profitable however diminishing cable television organization, providing a clearer investment image and most likely setting the phase for a sale or spin-off of the cable system.

The media veteran and advisor forecasted Paramount and others might take a similar path.

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 positioning the business for its next chess relocation, composed MoffettNathanson analyst Robert Fishman.

“The question is not whether more pieces will be moved or knocked off the board, or if additional consolidation will occur-- it is a matter of who is the purchaser and who is the seller,” wrote Fishman.

Zaslav signaled that situation throughout 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 in 2015, though a deal never materialized, according to a regulatory filing last month.

Others injected a note of care, keeping in mind Warner Bros Discovery brings $40.4 billion in financial obligation.

“The structure modification would make it much easier for WBD to offer off its direct TV networks,” eMarketer expert Ross Benes stated, describing the cable television organization. “However, discovering a purchaser will be tough. The networks are in financial obligation and have no indications of growth.”

In August, Warner Bros Discovery composed down the worth of its TV properties by over $9 billion due to uncertainty around fees from cable and satellite distributors and sports betting rights renewals.
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Today, the media company announced a multi-year offer increasing the overall costs Comcast will pay to disperse Warner Bros Discovery’s networks.

Warner Bros Discovery is wagering the Comcast contract, together with an offer reached this year with cable and broadband supplier Charter, will be a template for future negotiations with suppliers. That might help support rates for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles