Shares jump 13% after restructuring statement
Follows path taken by Comcast's brand-new spin-off company
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Challenges seen in offering debt-laden direct 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 decided to separate its decreasing cable TV services such as CNN from streaming and studio operations such as Max, laying the groundwork for a prospective sale or spinoff of its TV service as more cable subscribers cut the cord.
Shares of Warner jumped after the business stated 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 alternatives for fading cable organizations, a longtime golden goose where earnings are deteriorating as countless consumers welcome streaming video.
Comcast last month unveiled plans to divide many of its NBCUniversal cable networks into a new public company. The brand-new business would be well capitalized and placed to get other cable television networks if the market combines, one source told Reuters.
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Bank of America research study analyst Jessica Reif Ehrlich wrote that Warner Bros Discovery's cable television service possessions are a "extremely logical partner" for Comcast's brand-new spin-off business.
"We highly think there is potential for fairly large synergies if WBD's direct networks were combined with Comcast SpinCo," composed Ehrlich, utilizing the market term for conventional tv.
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"Further, we think WBD's standalone streaming and studio properties would be an appealing takeover target."
Under the new structure for Warner Bros Discovery, the cable television service 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 film studios, consisting of 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 firm Integrated Media. "Now, it's winning as a service."
Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's new business structure will distinguish growing studio and streaming possessions from rewarding but diminishing cable service, giving a clearer investment photo and likely setting the phase for a sale or spin-off of the cable television unit.
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The media veteran and consultant anticipated 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 bigger target, AT&T's WarnerMedia, is placing the business for its next chess move, composed MoffettNathanson expert Robert Fishman.
"The concern is not whether more pieces will be moved around or knocked off the board, or if additional debt consolidation will take place-- it is a matter of who is the purchaser and who is the seller," composed Fishman.
Zaslav signified that circumstance throughout Warner Bros Discovery's financier call last month. He said he anticipated President-elect Donald Trump's administration would be friendlier to deal-making, unlocking to media industry combination.
Zaslav had actually engaged in merger talks with Paramount late in 2015, though an offer never ever materialized, according to a regulative filing last month.
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Others injected a note of caution, keeping in mind Warner Bros Discovery brings $40.4 billion in debt.
"The structure change would make it much easier for WBD to sell off its linear TV networks," eMarketer analyst Ross Benes stated, describing the . "However, discovering a purchaser will be challenging. The networks owe money and have no signs of growth."
In August, Warner Bros Discovery documented the worth of its TV assets by over $9 billion due to unpredictability around charges from cable and satellite suppliers and sports betting rights renewals.
Today, the media company revealed a multi-year deal increasing the general fees Comcast will pay to disperse Warner Bros Discovery's networks.
Warner Bros Discovery is wagering the Comcast contract, together with a deal reached this year with cable and broadband service provider Charter, will be a template for future negotiations with suppliers. That could assist stabilize 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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