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Shares dive 13% after reorganizing announcement
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Follows course taken by Comcast’s brand-new spin-off business
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Challenges seen in offering debt-laden linear TV networks

(New throughout, adds details, background, comments from market insiders and analysts, 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 television businesses such as CNN from streaming and studio operations such as Max, laying the foundation for a potential sale or spinoff of its TV organization as more cable subscribers cut the cord.

Shares of Warner leapt after the business said the brand-new structure would be more deal friendly and it anticipated to complete the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.

Media companies are considering alternatives for fading cable companies, a longtime cash cow where revenues are deteriorating as millions of consumers welcome streaming video.

Comcast last month unveiled strategies to split the majority of its NBCUniversal cable networks into a brand-new public company. The brand-new company would be well capitalized and positioned to get other cable networks if the industry combines, one source informed Reuters.

Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable television service assets are a “very rational partner” for Comcast’s brand-new spin-off company.

“We highly think there is potential for fairly substantial synergies if WBD’s linear networks were combined with Comcast SpinCo,” composed Ehrlich, utilizing the industry term for standard television.

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

Under the new structure for Warner Bros Discovery, the cable television company consisting of TNT, Animal Planet and CNN will be housed in an unit called Global Linear Networks.

Streaming platforms Max and Discovery+ will be under a different division along with movie studios, consisting of Warner Bros Pictures and New Line Cinema.

The shows 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 habits,” said Jonathan Miller, president 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 corporate structure will differentiate growing studio and streaming assets from lucrative however diminishing cable television company, giving a clearer financial investment image and most likely setting the stage for a sale or spin-off of the cable television unit.

The media veteran and advisor 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 getting the even larger target, AT&T’s WarnerMedia, is positioning the company for its next chess relocation, composed MoffettNathanson expert Robert Fishman.

“The concern is not whether more pieces will be moved or knocked off the board, or if further debt consolidation will take place-- it refers who is the purchaser and who is the seller,” composed Fishman.

Zaslav signaled that circumstance throughout Warner Bros Discovery’s financier call last month. He said he anticipated President-elect Donald Trump’s administration would be friendlier to deal-making, opening the door to media market debt consolidation.

Zaslav had taken part in merger talks with Paramount late in 2015, though a deal never emerged, according to a regulatory filing last month.

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

“The structure change would make it much easier for WBD to offer off its linear TV networks,” eMarketer expert Ross Benes stated, referring to the cable television organization. “However, discovering a purchaser will be challenging. The networks owe money and have no indications of development.”

In August, Warner Bros Discovery made a note of the value of its TV properties by over $9 billion due to unpredictability around fees from cable television 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 fees Comcast will pay to distribute Warner Bros Discovery’s networks.

Warner Bros Discovery is wagering the Comcast agreement, together with an offer reached this year with cable and broadband provider Charter, will be a design 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