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Shares jump 13% after restructuring announcement
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Follows path 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 analysts, updates share rates)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
Dec 12 (Reuters) - Warner Bros Discovery on Thursday decided to separate its declining cable television TV companies such as CNN from streaming and studio operations such as Max, preparing for a potential sale or spinoff of its TV business as more cable customers cut the cord.
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Shares of Warner leapt after the business said the new structure would be more deal friendly and it expected to finish the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.
Media business are thinking about options for fading cable TV services, a longtime money cow where profits are wearing down as millions of consumers embrace video.
Comcast last month unveiled plans to split the majority of its NBCUniversal cable networks into a new public business. The brand-new company would be well capitalized and placed to obtain other cable networks if the market combines, one source told Reuters.
Bank of America research study expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable television service assets are a "very sensible partner" for Comcast's new spin-off company.
"We highly think there is capacity for fairly large synergies if WBD's linear networks were combined with Comcast SpinCo," wrote Ehrlich, utilizing the market term for standard 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 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 department along with movie studios, consisting of Warner Bros Pictures and New Line Cinema.
The restructuring reflects an inflection point for the media industry, as financial investments in streaming services such as Warner Bros Discovery's Max are lastly settling.
"Streaming won as a behavior," stated Jonathan Miller, chief executive of digital media investment firm Integrated Media. "Now, it's winning as an organization."
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Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's new business structure will differentiate growing studio and streaming possessions from profitable however diminishing cable television organization, offering a clearer financial investment image and likely setting the phase for a sale or spin-off of the cable television unit.
The media veteran and consultant anticipated 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 placing the company for its next chess move, wrote MoffettNathanson analyst Robert Fishman.
"The concern is not whether more pieces will be moved or knocked off the board, or if additional consolidation will take place-- it refers who is the purchaser and who is the seller," composed Fishman.
Zaslav signified that scenario during Warner Bros Discovery's financier 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 participated in merger talks with Paramount late last year, though a deal never emerged, according to a regulatory filing last month.
Others injected a note of caution, noting Warner Bros Discovery brings $40.4 billion in debt.
"The structure modification would make it simpler for WBD to offer off its direct TV networks," eMarketer expert Ross Benes said, referring to the cable business. "However, discovering a buyer will be tough. The networks owe money and have no signs of growth."
In August, Warner Bros Discovery jotted down the worth of its TV properties by over $9 billion due to unpredictability around fees from cable television and satellite distributors and sports betting rights renewals.
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Today, the media company revealed a multi-year offer increasing the total charges Comcast will pay to disperse Warner Bros Discovery's networks.
Warner Bros Discovery is wagering the Comcast arrangement, together with a deal reached this year with cable television and broadband company Charter, will be a template for future negotiations with suppliers. That might help stabilize 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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