Shares dive 13% after reorganizing statement
Follows course taken by Comcast's brand-new spin-off company
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Challenges seen in selling debt-laden direct TV networks
(New throughout, includes 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 declining cable services such as CNN from streaming and studio operations such as Max, preparing for a possible sale or spinoff of its TV company as more cable television subscribers cut the cable.
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%.
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Media business are considering choices for fading cable TV companies, a long time money cow where profits are deteriorating as millions of customers embrace streaming video.
Comcast last month revealed plans to divide the majority of its NBCUniversal cable television networks into a new public company. The brand-new business would be well capitalized and placed to get other cable networks if the industry consolidates, one source told Reuters.
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Bank of America research analyst Jessica Reif Ehrlich composed that Warner Bros Discovery's cable television service assets are a "extremely rational partner" for Comcast's new spin-off company.
"We highly think there is capacity for relatively large synergies if WBD's direct networks were integrated with Comcast SpinCo," composed Ehrlich, using the industry term for conventional television.
"Further, our company 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 company including TNT, Animal Planet and CNN will be housed in a system 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 shows an inflection point for the media industry, as financial investments in streaming services such as Warner Bros Discovery's Max are lastly paying off.
"Streaming won as a habits," stated Jonathan Miller, president of digital media investment firm Integrated Media. "Now, it's winning as a business."
Brightcove CEO Marc DeBevoise said Warner Bros Discovery's brand-new business structure will distinguish growing studio and streaming properties from successful but diminishing cable television company, giving a clearer financial investment photo and likely setting the phase for a sale or spin-off of the cable unit.
The media veteran and consultant 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 acquiring the even bigger target, AT&T's WarnerMedia, is positioning the company for its next chess relocation, wrote MoffettNathanson expert Robert Fishman.
"The question is not whether more pieces will be moved around or knocked off the board, or if more combination will occur-- it is a matter of who is the purchaser and who is the seller," composed Fishman.
Zaslav indicated that situation during 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 industry debt consolidation.
Zaslav had actually engaged in merger talks with Paramount late in 2015, though a deal never ever emerged, according to a regulative filing last month.
Others a note of caution, keeping in mind Warner Bros Discovery carries $40.4 billion in financial obligation.
"The structure change 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, discovering a purchaser will be difficult. The networks are in financial obligation and have no indications of growth."
In August, Warner Bros Discovery made a note of the value of its TV assets by over $9 billion due to uncertainty around fees from cable and satellite suppliers and sports betting rights renewals.
Today, the media company announced a multi-year deal increasing the overall charges Comcast will pay to disperse Warner Bros Discovery's networks.
Warner Bros Discovery is wagering the Comcast contract, together with a deal reached this year with cable and broadband provider Charter, will be a design template for future settlements with suppliers. That might assist support prices for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles
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