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Warner Bros Discovery Sets Stage For Potential Cable Deal By
Shares jump 13% after restructuring announcement
Follows course taken by Comcast’s new spin-off business
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Challenges seen in linear TV networks
(New throughout, adds details, background, comments from industry experts and experts, updates share costs)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
Dec 12 (Reuters) – Warner Bros Discovery on Thursday decided to separate its decreasing cable television businesses such as CNN from streaming and studio operations such as Max, preparing for a possible sale or spinoff of its TV company as more cable television subscribers cut the cable.
Shares of Warner jumped after the business stated 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 considering alternatives for fading cable television companies, a long time cash cow where earnings are eroding as millions of consumers embrace streaming video.
Comcast last month unveiled strategies to split the majority of its NBCUniversal cable television networks into a brand-new public business. The brand-new company would be well capitalized and placed to get other cable networks if the industry combines, one source informed Reuters.
Bank of America research expert Jessica Reif Ehrlich wrote that Warner Bros Discovery’s cable television service possessions are a “really sensible partner” for Comcast’s brand-new spin-off company.
“We highly believe there is potential for relatively substantial synergies if WBD’s direct networks were combined with Comcast SpinCo,” wrote Ehrlich, using the market term for standard television.
“Further, our company believe WBD’s standalone streaming and studio possessions would be an appealing takeover target.”
Under the brand-new structure for Warner Bros Discovery, the cable television TV organization 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 separate department in addition to 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 habits,” stated Jonathan Miller, chief executive of digital media financial investment company Integrated Media. “Now, it’s winning as a business.”
Brightcove CEO Marc DeBevoise stated Warner Bros Discovery’s brand-new corporate structure will separate growing studio and streaming assets from lucrative however diminishing cable television TV company, offering a clearer investment picture and likely setting the stage for a sale or spin-off of the cable television system.
The media veteran and adviser anticipated 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 positioning the business for its next chess relocation, wrote MoffettNathanson expert Robert Fishman.
“The question is not whether more pieces will be moved or knocked off the board, or if further combination will happen– it is a matter of who is the purchaser and who is the seller,” wrote Fishman.
Zaslav signaled that scenario during 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 market debt consolidation.
Zaslav had taken part in merger talks with Paramount late in 2015, though an offer never ever materialized, according to a regulative filing last month.
Others injected a note of caution, noting Warner Bros Discovery carries $40.4 billion in financial obligation.
“The structure modification would make it easier for WBD to offer off its linear TV networks,” eMarketer analyst Ross Benes said, describing the cable service. “However, finding a purchaser 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 properties by over $9 billion due to unpredictability around costs from cable and satellite distributors and sports betting rights renewals.
Today, the media company announced a multi-year deal increasing the total charges Comcast will pay to disperse Warner Bros Discovery’s networks.
Warner Bros Discovery is sports betting the Comcast agreement, together with an offer reached this year with cable television and broadband provider Charter, will be a template for future negotiations with distributors. That could help stabilize pricing 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)