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Shares jump 13% after reorganizing statement
Follows path taken by Comcast's new spin-off business
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Challenges seen in offering debt-laden direct TV networks
(New throughout, adds information, background, comments from industry insiders and experts, updates share rates)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
Dec 12 (Reuters) - Warner Bros Discovery on Thursday decided to separate its decreasing cable TV services such as CNN from streaming and studio operations such as Max, laying the groundwork for a possible sale or spinoff of its TV company as more cable customers cut the cord.
Shares of Warner jumped after the business stated the brand-new structure would be more deal friendly and it expected to complete the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.
Media companies are thinking about alternatives for fading cable companies, a long time money cow where profits are deteriorating as millions of customers embrace streaming video.
Comcast last month unveiled plans to split most of its NBCUniversal cable television networks into a brand-new public company. The new business would be well capitalized and placed to get other cable networks if the industry consolidates, one source informed Reuters.
Bank of America research expert Jessica Reif Ehrlich wrote that Warner Bros Discovery's cable television service properties are a "extremely sensible partner" for Comcast's brand-new spin-off company.
"We highly believe there is capacity for fairly large synergies if WBD's linear networks were combined with Comcast SpinCo," Ehrlich, utilizing the market term for conventional tv.
"Further, our company believe WBD's standalone streaming and studio properties would be an appealing takeover target."
Under the new structure for Warner Bros Discovery, the cable company 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 separate division together with 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 habits," stated Jonathan Miller, chief executive of digital media investment company 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 lucrative but diminishing cable television business, providing a clearer investment photo and likely setting the stage for a sale or spin-off of the cable unit.
The media veteran and consultant predicted Paramount and others may take a similar course.
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 move, wrote MoffettNathanson analyst Robert Fishman.
"The concern is not whether more pieces will be walked around or knocked off the board, or if further consolidation will occur-- it is a matter of who is the purchaser and who is the seller," wrote Fishman.
Zaslav signified that circumstance during Warner Bros Discovery's financier call last month. He stated he anticipated President-elect Donald Trump's administration would be friendlier to deal-making, unlocking to media market debt consolidation.
Zaslav had participated in merger talks with Paramount late in 2015, though an offer never ever 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 debt.
"The structure change would make it easier for WBD to sell its linear TV networks," eMarketer expert Ross Benes said, describing the cable television TV business. "However, discovering a buyer will be challenging. The networks owe money and have no signs of development."
In August, Warner Bros Discovery documented the value of its TV properties by over $9 billion due to unpredictability around costs from cable and satellite distributors and sports betting rights renewals.
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Today, the media business announced a multi-year offer increasing the total fees 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 and broadband supplier Charter, will be a template for future settlements with distributors. 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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