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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 brand-new spin-off business

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Challenges seen in selling debt-laden direct TV networks

(New throughout, adds details, background, remarks from industry insiders and analysts, 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 organizations such as CNN from streaming and studio operations such as Max, laying the groundwork for a possible sale or spinoff of its TV company as more cable customers 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 thinking about options for fading cable television TV organizations, a long time money cow where earnings are deteriorating as countless customers accept streaming video.

Comcast last month revealed plans to divide most 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 combines, one source informed Reuters.

Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable 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 linear networks were integrated with Comcast SpinCo,” wrote Ehrlich, utilizing the industry term for standard tv.

“Further, our company believe WBD’s standalone streaming and studio properties would be an appealing takeover target.”

Under the brand-new structure for Warner Bros Discovery, the cable TV 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 department together with film studios, consisting of Warner Bros Pictures and New Line Cinema.

The restructuring shows an inflection point for the media industry, as investments in streaming services such as Warner Bros Discovery’s Max are finally settling.

“Streaming won as a habits,” said 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 brand-new corporate structure will separate growing studio and streaming assets from lucrative however shrinking cable TV company, a clearer investment photo and likely setting the phase for a sale or spin-off of the cable television system.

The media veteran and consultant 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 larger target, AT&T’s WarnerMedia, is positioning the business for its next chess relocation, composed 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 take place– it is a matter of who is the purchaser and who is the seller,” wrote Fishman.

Zaslav signified that scenario throughout Warner Bros Discovery’s financier call last month. He stated he expected President-elect Donald Trump’s administration would be friendlier to deal-making, unlocking to media industry consolidation.

Zaslav had actually participated in merger talks with Paramount late last year, though a deal never ever materialized, according to a regulatory filing last month.

Others injected a note of caution, keeping in mind Warner Bros Discovery carries $40.4 billion in debt.

“The structure modification would make it easier for WBD to sell its linear TV networks,” eMarketer analyst Ross Benes said, referring to the cable company. “However, finding a buyer will be tough. The networks owe money and have no signs of development.”

In August, Warner Bros Discovery jotted down the worth of its TV assets by over $9 billion due to uncertainty around fees from cable television and satellite distributors and sports betting rights renewals.

This week, the media company announced a multi-year deal increasing the overall fees Comcast will pay to distribute Warner Bros Discovery’s networks.

Warner Bros Discovery is wagering the Comcast contract, together with an offer reached this year with cable and broadband company Charter, will be a design template for future negotiations with distributors. That might help support prices 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)