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Warner Bros Discovery Sets Stage For Potential Cable Deal By

savannahbyrnes edited this page 2024-12-19 16:15:55 -06:00

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Shares jump 13% after restructuring statement
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Follows path 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 market insiders and analysts, updates share rates)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) - Warner Bros Discovery on Thursday chose to separate its decreasing cable TV companies such as CNN from streaming and studio operations such as Max, preparing for a potential sale or spinoff of its TV business as more cable subscribers cut the cord.

Shares of Warner jumped after the company stated 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 companies are thinking about choices for fading cable television businesses, a long time cash cow where incomes are deteriorating as millions of consumers welcome streaming video.

Comcast last month revealed plans to divide the majority of its NBCUniversal cable television networks into a new public company. The new business would be well capitalized and placed to obtain other cable television networks if the industry consolidates, one source informed Reuters.

Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable tv assets are a "really sensible partner" for Comcast's brand-new spin-off company.

"We strongly believe there is potential for relatively large synergies if WBD's direct networks were integrated with Comcast SpinCo," wrote Ehrlich, using the market term for traditional television.

"Further, we think WBD's standalone streaming and studio properties would be an attractive takeover target."

Under the brand-new structure for Warner Bros Discovery, the cable company including TNT, Animal Planet and CNN will be housed in an unit called Global Linear Networks.
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Streaming platforms Max and Discovery+ will be under a different division in addition to movie studios, including Warner Bros Pictures and New Line Cinema.

The restructuring reflects an inflection point for the media industry, as investments in streaming services such as Warner Bros Discovery's Max are lastly paying off.

"Streaming won as a behavior," stated Jonathan Miller, president of digital media investment company Integrated Media. "Now, it's winning as a service."

Brightcove CEO Marc DeBevoise said Warner Bros Discovery's brand-new business structure will distinguish growing studio and streaming properties from profitable but shrinking cable TV organization, providing a clearer investment picture and most likely setting the phase for a sale or spin-off of the cable television unit.

The media veteran and advisor anticipated Paramount and others may 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 company for its next chess move, 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 take place-- it refers who is the buyer and who is the seller," wrote Fishman.

Zaslav signified that circumstance 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, opening the door to media industry debt consolidation.
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Zaslav had taken part in merger talks with Paramount late last year, though an offer never ever materialized, according to a regulative filing last month.

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

"The structure change would make it simpler for WBD to sell its direct TV networks," eMarketer analyst Ross Benes stated, referring to the cable television business. "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 value of its TV possessions by over $9 billion due to around costs from cable and satellite distributors and sports betting rights renewals.
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This week, the media company announced a multi-year offer increasing the total charges 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 television and broadband provider Charter, will be a design template for future negotiations with suppliers. That could help stabilize rates for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles