Warner Bros Discovery Sets Stage For Potential Cable Deal By

Shares jump 13% after reorganizing statement

Follows course taken by Comcast’s new spin-off company

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Challenges seen in selling debt-laden direct TV networks

(New throughout, includes details, background, comments from industry insiders and analysts, updates share prices)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) – Warner Bros Discovery on Thursday chose to separate its decreasing cable businesses such as CNN from streaming and studio operations such as Max, preparing for a potential sale or spinoff of its TV service as more cable subscribers cut the cord.

Shares of Warner leapt after the business said the brand-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 thinking about choices for fading cable television TV businesses, a longtime golden goose where earnings are wearing down as countless consumers embrace streaming video.

Comcast last month unveiled plans to split the majority of its NBCUniversal cable networks into a new public business. The brand-new business would be well capitalized and positioned to obtain other cable networks if the industry combines, one source informed Reuters.

Bank of America research analyst Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable tv assets are a “very sensible partner” for Comcast’s brand-new spin-off company.

“We highly think there is capacity for relatively sizable synergies if WBD’s linear networks were combined with Comcast SpinCo,” wrote Ehrlich, using the market term for traditional tv.

“Further, we believe WBD’s standalone streaming and studio assets would be an attractive takeover target.”

Under the new structure for Warner Bros Discovery, the cable television 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 separate division together with film studios, including Warner Bros Pictures and New Line Cinema.

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

“Streaming won as a behavior,” said Jonathan Miller, chief executive of digital media investment firm Integrated Media. “Now, it’s winning as an organization.”

Brightcove CEO Marc DeBevoise said Warner Bros Discovery’s new business structure will differentiate growing studio and streaming possessions from profitable however shrinking cable television TV company, giving a clearer investment image and likely the stage for a sale or spin-off of the cable television unit.

The media veteran and advisor anticipated Paramount and others may take a comparable 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 business for its next chess move, wrote MoffettNathanson expert Robert Fishman.

“The question is not whether more pieces will be moved around or knocked off the board, or if additional combination will take place– it is a matter of who is the purchaser and who is the seller,” composed Fishman.

Zaslav signaled that situation throughout 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 market combination.

Zaslav had taken part in merger talks with Paramount late in 2015, though a deal never emerged, 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 simpler for WBD to sell its linear TV networks,” eMarketer analyst Ross Benes stated, referring to the cable television company. “However, discovering a purchaser will be difficult. The networks owe money and have no signs of development.”

In August, Warner Bros Discovery jotted down the value of its TV properties by over $9 billion due to uncertainty around charges from cable and satellite distributors and sports betting rights renewals.

This week, the media business announced a multi-year deal increasing the general charges Comcast will pay to disperse Warner Bros Discovery’s networks.

Warner Bros Discovery is sports betting the Comcast arrangement, together with an offer reached this year with cable and broadband supplier Charter, will be a template for future negotiations with distributors. That could assist stabilize prices 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)