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Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares jump 13% after restructuring statement

Follows path taken by Comcast’s new spin-off business

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Challenges seen in selling debt-laden linear TV networks

(New throughout, includes information, background, remarks from industry experts and experts, updates share costs)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) – Warner Bros Discovery on Thursday chose to separate its declining cable television organizations such as CNN from streaming and studio operations such as Max, preparing for a possible sale or spinoff of its TV organization as more cable subscribers cut the cable.

Shares of Warner leapt after the company 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 companies are considering options for fading cable organizations, a long time money cow where revenues are deteriorating as countless consumers 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 positioned to get other cable networks if the industry consolidates, one source informed Reuters.

Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable television service properties are a “really sensible partner” for Comcast’s brand-new spin-off business.

“We strongly think there is capacity for fairly sizable synergies if WBD’s direct networks were integrated with Comcast SpinCo,” wrote Ehrlich, using the industry term for traditional tv.

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

Under the brand-new structure for Warner Bros Discovery, the cable television TV service including 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 department in addition to movie studios, consisting of Warner Bros Pictures and New Line Cinema.

The restructuring shows an inflection point for the media market, as financial investments in streaming services such as Warner Bros Discovery’s Max are lastly settling.

“Streaming won as a habits,” said Jonathan Miller, primary executive of digital media investment firm Integrated Media. “Now, it’s winning as a company.”

Brightcove CEO Marc DeBevoise stated Warner Bros Discovery’s new corporate structure will differentiate growing studio and streaming properties from successful however diminishing cable television organization, providing a clearer financial investment photo and most likely setting the phase for a sale or spin-off of the cable television unit.

The media veteran and consultant predicted Paramount and others might take a similar course.

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 business for its next chess move, wrote MoffettNathanson expert Robert Fishman.

“The concern is not whether more pieces will be moved or knocked off the board, or if more consolidation will happen– it is a matter of who is the purchaser and who is the seller,” composed Fishman.

Zaslav signified that situation during Warner Bros Discovery’s investor call last month. He stated he expected President-elect Donald Trump’s administration would be friendlier to deal-making, unlocking to media market consolidation.

Zaslav had participated in merger talks with Paramount late last year, though a deal never emerged, according to a regulative filing last month.

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

“The structure modification would make it simpler for WBD to sell its linear TV networks,” eMarketer analyst Ross Benes stated, referring to the cable business. “However, discovering a purchaser will be difficult. The networks are in debt and have no signs of growth.”

In August, Warner Bros Discovery jotted down the worth of its TV possessions by over $9 billion due to uncertainty around fees from cable television and satellite suppliers and sports betting rights renewals.

Today, the media company announced a multi-year deal increasing the overall costs Comcast will pay to distribute Warner Bros Discovery’s networks.

Warner Bros Discovery is sports betting the Comcast contract, together with an this year with cable television and broadband service provider Charter, will be a design template for future settlements with distributors. 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; Editing by Shilpi Majumdar, Arun Koyyur, Keith Weir and David Gregorio)