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Shares dive 13% after reorganizing statement
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Follows path taken by Comcast's brand-new spin-off company
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Challenges seen in offering debt-laden direct TV networks
(New throughout, includes details, background, comments from market experts and experts, updates share costs)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
Dec 12 (Reuters) - Warner Bros Discovery on Thursday decided to separate its decreasing cable businesses such as CNN from streaming and studio operations such as Max, preparing for a possible sale or spinoff of its TV service as more cable television customers cut the cord.
Shares of Warner jumped 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 business are considering options for fading cable television companies, a long time golden goose where incomes are deteriorating as countless consumers accept streaming video.
Comcast last month unveiled strategies to split many of its NBCUniversal cable networks into a new public company. The brand-new company would be well capitalized and positioned to acquire other cable television networks if the industry consolidates, one source informed Reuters.
Bank of America research study analyst Jessica Reif Ehrlich composed that Warner Bros Discovery's cable assets are a "extremely logical partner" for Comcast's new spin-off company.
"We strongly believe there is potential for relatively sizable synergies if WBD's linear networks were integrated with Comcast SpinCo," composed Ehrlich, utilizing the market term for standard tv.
"Further, our company believe WBD's standalone streaming and studio possessions would be an appealing takeover target."
Under the new structure for Warner Bros Discovery, the cable business including 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 department along with 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 finally paying off.
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"Streaming won as a behavior," said Jonathan Miller, president of financial investment business Integrated Media. "Now, it's winning as a service."
Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's new corporate structure will separate growing studio and streaming assets from lucrative but shrinking cable television business, offering a clearer financial investment photo and most likely setting the phase for a sale or spin-off of the cable system.
The media veteran and consultant predicted Paramount and others might take a comparable path.
CEO David Zaslav, a veteran deal-maker who led Discovery through its acquisition of Scripps Networks Interactive before acquiring the even larger target, AT&T's WarnerMedia, is positioning the company for its next chess relocation, composed MoffettNathanson analyst Robert Fishman.
"The question is not whether more pieces will be moved or knocked off the board, or if additional debt consolidation will occur-- it is a matter of who is the purchaser and who is the seller," wrote Fishman.
Zaslav indicated that situation during Warner Bros Discovery's investor call last month. He said he expected President-elect Donald Trump's administration would be friendlier to deal-making, opening the door to media industry consolidation.
Zaslav had actually taken part in merger talks with Paramount late in 2015, though an offer never materialized, according to a regulatory filing last month.
Others injected a note of caution, keeping in mind 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 expert Ross Benes said, describing the cable television business. "However, finding a purchaser will be challenging. The networks are in debt and have no signs of growth."
In August, Warner Bros Discovery jotted down the value of its TV possessions by over $9 billion due to unpredictability around costs from cable television and satellite distributors and sports betting rights renewals.
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Today, the media business announced a multi-year deal increasing the overall charges Comcast will pay to distribute Warner Bros Discovery's networks.
Warner Bros Discovery is sports betting the Comcast agreement, together with a deal reached this year with cable and broadband company Charter, will be a design template for future settlements with suppliers. That might assist stabilize rates for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles
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