Shares dive 13% after restructuring statement
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Follows course taken by Comcast's brand-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 experts and experts, updates share prices)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
Dec 12 (Reuters) - Warner Bros Discovery on Thursday decided to separate its declining cable TV businesses such as CNN from streaming and studio operations such as Max, laying the groundwork for a prospective sale or spinoff of its TV business as more cable customers cut the cable.
Shares of Warner jumped after the business stated the 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 thinking about options for fading cable television TV organizations, a long time cash cow where earnings are eroding as millions of customers welcome streaming video.
Comcast last month revealed plans to split many of its NBCUniversal cable television networks into a brand-new public business. The brand-new business would be well capitalized and placed to acquire other cable television networks if the industry consolidates, one source informed Reuters.
Bank of America research analyst Jessica Reif Ehrlich composed that Warner Bros Discovery's cable tv possessions are a "extremely sensible partner" for Comcast's new spin-off company.
"We strongly think there is capacity for fairly large synergies if WBD's linear networks were combined with Comcast SpinCo," composed Ehrlich, using the market term for conventional tv.
"Further, our company believe WBD's standalone streaming and studio assets would be an attractive takeover target."
Under the brand-new structure for Warner Bros Discovery, the cable business including TNT, Animal Planet and CNN will be housed in a system called Global Linear Networks.
Streaming platforms Max and Discovery+ will be under a separate department along with movie studios, including Warner Bros Pictures and New Line Cinema.
The restructuring reflects an inflection point for the media market, as investments in such as Warner Bros Discovery's Max are finally settling.
"Streaming won as a habits," stated Jonathan Miller, chief executive of digital media investment business Integrated Media. "Now, it's winning as an organization."
Brightcove CEO Marc DeBevoise said Warner Bros Discovery's new business structure will separate growing studio and streaming possessions from rewarding but shrinking cable TV organization, giving a clearer financial investment photo and most likely setting the phase for a sale or spin-off of the cable unit.
The media veteran and adviser forecasted 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 move, composed MoffettNathanson expert Robert Fishman.
"The question is not whether more pieces will be walked around or knocked off the board, or if further combination will occur-- it is a matter of who is the purchaser and who is the seller," composed Fishman.
Zaslav indicated that scenario throughout Warner Bros Discovery's investor call last month. He stated he anticipated President-elect Donald Trump's administration would be friendlier to deal-making, unlocking to media market consolidation.
Zaslav had actually engaged in merger talks with Paramount late in 2015, though an offer never ever materialized, according to a regulatory filing last month.
Others injected a note of caution, keeping in mind Warner Bros Discovery brings $40.4 billion in financial obligation.
"The structure change would make it simpler for WBD to sell its linear TV networks," eMarketer analyst Ross Benes said, referring to the cable organization. "However, finding a purchaser will be tough. The networks are in financial obligation and have no signs of growth."
In August, Warner Bros Discovery jotted down the value of its TV properties by over $9 billion due to unpredictability around fees from cable and satellite distributors and sports betting rights renewals.
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This week, the media business revealed a multi-year deal increasing the overall fees Comcast will pay to disperse Warner Bros Discovery's networks.
Warner Bros Discovery is wagering the Comcast agreement, 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 help support 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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