Warner Bros Discovery Sets Stage For Potential Cable Deal By
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Shares jump 13% after reorganizing statement
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Follows course taken by Comcast's new spin-off business
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Challenges seen in selling debt-laden direct TV networks
(New throughout, includes information, background, comments from market experts and experts, 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 television businesses such as CNN from streaming and studio operations such as Max, preparing for a prospective sale or spinoff of its TV company as more cable customers cut the cord.
Shares of Warner leapt after the business said the 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 business are considering options for fading cable companies, a long time golden goose where profits are eroding as countless consumers accept streaming video.
Comcast last month unveiled plans to split the majority of its NBCUniversal cable television networks into a brand-new public company. The brand-new business would be well capitalized and positioned to get other cable television networks if the market combines, one source informed Reuters.
Bank of America research analyst Jessica Reif Ehrlich wrote that Warner Bros Discovery's cable television service properties are a "very sensible partner" for Comcast's brand-new spin-off company.
"We strongly believe there is potential for fairly substantial synergies if WBD's linear networks were integrated with Comcast SpinCo," composed Ehrlich, utilizing the industry term for conventional 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 television business 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 along with movie studios, including 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 paying off.
"Streaming won as a habits," stated Jonathan Miller, president of digital media investment firm Integrated Media. "Now, it's winning as a company."
Brightcove CEO Marc DeBevoise said Warner Bros Discovery's new business structure will differentiate growing studio and streaming assets from lucrative but diminishing cable organization, giving a clearer investment picture and most likely setting the phase for a sale or spin-off of the cable television system.
The media veteran and consultant anticipated Paramount and others may 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 relocation, composed MoffettNathanson expert Robert Fishman.
"The concern is not whether more pieces will be moved around or knocked off the board, or if further debt consolidation will happen-- it refers who is the purchaser and who is the seller," wrote Fishman.
Zaslav indicated that circumstance during Warner Bros Discovery's investor call last month. He stated he anticipated President-elect Donald Trump's administration would be friendlier to deal-making, opening the door to media industry combination.
Zaslav had taken part in merger talks with Paramount late in 2015, though a deal never emerged, according to a regulative filing last month.
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Others injected a note of care, noting Warner Bros Discovery carries $40.4 billion in financial obligation.
"The structure modification would make it much easier for WBD to offer off its linear TV networks," eMarketer analyst Ross Benes stated, referring to the cable service. "However, finding a purchaser will be tough. The networks are in debt and have no indications of growth."
In August, Warner Bros Discovery made a note of the worth of its TV possessions by over $9 billion due to uncertainty around fees from cable and satellite distributors and sports betting rights renewals.
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Today, the media business revealed a multi-year deal increasing the overall costs Comcast will pay to Bros Discovery's networks.
Warner Bros Discovery is wagering the Comcast arrangement, together with a deal reached this year with cable and broadband supplier Charter, will be a design template for future settlements with suppliers. That could assist stabilize pricing for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles; Editing by Shilpi Majumdar, Arun Koyyur, Keith Weir and David Gregorio)
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