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Shares dive 13% after restructuring statement

Follows course taken by Comcast’s brand-new spin-off company

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Challenges seen in offering debt-laden direct TV networks
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(New throughout, adds information, background, comments from market insiders and experts, updates share prices)
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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, laying the groundwork for a prospective sale or spinoff of its TV service as more cable customers cut the cable.

Shares of Warner leapt after the business 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 options for fading cable television companies, a longtime cash cow where earnings are eroding as countless customers embrace streaming video.

Comcast last month unveiled plans to divide the majority of its NBCUniversal cable networks into a new public company. The brand-new company would be well capitalized and placed to get other cable television networks if the market combines, one source told Reuters.

Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable tv assets are a “extremely sensible partner” for Comcast’s new spin-off business.

“We highly believe there is capacity for fairly sizable synergies if WBD’s direct networks were integrated with Comcast SpinCo,” composed Ehrlich, utilizing the market term for standard tv.

“Further, we 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 service 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 division in addition to 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 lastly settling.
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“Streaming won as a habits,” said Jonathan Miller, chief executive of digital media investment company Integrated Media. “Now, it’s winning as a service.”

Brightcove CEO Marc DeBevoise stated Warner Bros Discovery’s brand-new business structure will differentiate growing studio and streaming properties from lucrative however diminishing cable television company, providing a clearer investment image and likely setting the phase for a sale or spin-off of the cable unit.

The media veteran and adviser anticipated 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 acquiring the even bigger target, AT&T’s WarnerMedia, is placing the business for its next chess move, composed MoffettNathanson analyst Robert Fishman.

“The question is not whether more pieces will be walked around or knocked off the board, or if further combination will take place-- it refers who is the purchaser and who is the seller,” composed Fishman.

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

Zaslav had participated in merger talks with Paramount late in 2015, though an offer never ever emerged, according to a regulative filing last month.

Others injected a note of care, noting Warner Bros Discovery carries $40.4 billion in financial obligation.

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

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

Today, the media company revealed 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 a deal reached this year with cable television and broadband provider Charter, will be a template for future settlements with distributors. That could assist support prices for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles