Shares dive 13% after restructuring statement
Follows path taken by Comcast's new spin-off company
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Challenges seen in selling debt-laden linear TV networks
(New throughout, adds details, background, comments from industry insiders and experts, updates share prices)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
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Dec 12 (Reuters) - Warner Bros Discovery on Thursday chose to separate its declining cable television businesses such as CNN from and studio operations such as Max, laying the foundation for a possible sale or spinoff of its TV business as more cable subscribers cut the cable.
Shares of Warner leapt after the business said the brand-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 considering choices for fading cable television organizations, a longtime golden goose where incomes are eroding as countless customers embrace streaming video.
Comcast last month revealed strategies to split the majority of its NBCUniversal cable television networks into a brand-new public company. The new business would be well capitalized and positioned to get other cable television networks if the market consolidates, one source informed Reuters.
Bank of America research study analyst Jessica Reif Ehrlich composed that Warner Bros Discovery's cable television service properties are a "very logical partner" for Comcast's brand-new spin-off company.
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"We highly believe there is capacity for fairly substantial synergies if WBD's linear networks were combined with Comcast SpinCo," composed Ehrlich, utilizing the industry term for traditional television.
"Further, our company believe WBD's standalone streaming and studio assets would be an attractive takeover target."
Under the new structure for Warner Bros Discovery, the cable TV service 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, including 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 behavior," said Jonathan Miller, president of digital media investment company Integrated Media. "Now, it's winning as a service."
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Brightcove CEO Marc DeBevoise said Warner Bros Discovery's brand-new corporate structure will distinguish growing studio and streaming possessions from successful but shrinking cable television company, giving a clearer financial investment photo and likely setting the stage for a sale or spin-off of the cable television system.
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The media veteran and consultant predicted 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 bigger target, AT&T's WarnerMedia, is placing the business for its next chess relocation, wrote MoffettNathanson analyst Robert Fishman.
"The concern is not whether more pieces will be moved around or knocked off the board, or if more combination will happen-- it refers who is the purchaser and who is the seller," composed Fishman.
Zaslav signaled that scenario throughout Warner Bros Discovery's financier call last month. He said he expected President-elect Donald Trump's administration would be friendlier to deal-making, unlocking to media industry consolidation.
Zaslav had taken part in merger talks with Paramount late last year, though a deal never ever materialized, according to a regulatory filing last month.
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Others injected a note of care, keeping in mind Warner Bros Discovery carries $40.4 billion in debt.
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"The structure change would make it easier for WBD to offer off its direct TV networks," eMarketer analyst Ross Benes stated, referring to the cable company. "However, discovering a buyer will be difficult. The networks owe money and have no indications of development."
In August, Warner Bros Discovery jotted down the value of its TV assets by over $9 billion due to uncertainty around costs from cable and satellite distributors and sports betting rights renewals.
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This week, the media business announced a multi-year deal increasing the overall fees 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 television and broadband supplier Charter, will be a template for future settlements with distributors. That could assist stabilize rates for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles
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