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Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares jump 13% after reorganizing announcement

Follows course taken by Comcast’s new spin-off business

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Challenges seen in offering debt-laden linear TV networks

(New throughout, includes details, background, comments from industry insiders and experts, updates share prices)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) – Warner Bros Discovery on Thursday chose to separate its declining cable television organizations such as CNN from streaming and studio operations such as Max, preparing for a potential sale or spinoff of its TV company as more cable television subscribers cut the cable.

Shares of Warner jumped after the company stated the new structure would be more deal friendly and it expected to finish the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.

Media business are considering choices for fading cable television businesses, a long time golden goose where earnings are deteriorating as millions of consumers accept streaming video.

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

Bank of America research study expert Jessica Reif Ehrlich wrote that Warner Bros Discovery’s cable television service possessions are a “really logical partner” for spin-off business.

“We strongly think there is potential for relatively sizable synergies if WBD’s direct networks were combined with Comcast SpinCo,” composed Ehrlich, using the industry term for conventional tv.

“Further, we believe WBD’s standalone streaming and studio possessions would be an attractive takeover target.”

Under the new structure for Warner Bros Discovery, the cable TV 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 division in addition to movie studios, consisting of 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 finally paying off.

“Streaming won as a behavior,” stated Jonathan Miller, primary executive of digital media investment firm Integrated Media. “Now, it’s winning as a company.”

Brightcove CEO Marc DeBevoise said Warner Bros Discovery’s new corporate structure will distinguish growing studio and streaming possessions from profitable but diminishing cable service, providing a clearer financial investment photo and most likely setting the stage for a sale or spin-off of the cable television unit.

The media veteran and adviser predicted 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 obtaining the even bigger target, AT&T’s WarnerMedia, is placing the company for its next chess relocation, composed MoffettNathanson expert Robert Fishman.

“The question is not whether more pieces will be moved around or knocked off the board, or if more consolidation will occur– it refers who is the buyer and who is the seller,” wrote Fishman.

Zaslav signaled that circumstance throughout Warner Bros Discovery’s investor call last month. He said he prepared for President-elect Donald Trump’s administration would be friendlier to deal-making, unlocking to media market combination.

Zaslav had engaged in merger talks with Paramount late last year, though an offer never materialized, according to a regulatory filing last month.

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

“The structure modification would make it much easier for WBD to sell its linear TV networks,” eMarketer analyst Ross Benes stated, referring to the cable television company. “However, finding a purchaser will be difficult. The networks owe money and have no indications of growth.”

In August, Warner Bros Discovery composed down the worth of its TV possessions by over $9 billion due to unpredictability around costs from cable television and satellite distributors and sports betting rights renewals.

This week, the media business announced a multi-year offer increasing the overall charges Comcast will pay to disperse Warner Bros Discovery’s networks.

Warner Bros Discovery is wagering the Comcast arrangement, together with an offer reached this year with cable television and broadband service provider Charter, will be a design template for future settlements 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; Editing by Shilpi Majumdar, Arun Koyyur, Keith Weir and David Gregorio)