Warner Bros Discovery Sets Stage For Potential Cable Deal By
Shares dive 13% after restructuring statement
Follows course taken by Comcast’s new spin-off business
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Challenges seen in offering debt-laden linear TV networks
(New throughout, includes details, background, remarks 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 decreasing cable organizations such as CNN from streaming and studio operations such as Max, preparing for a possible sale or spinoff of its TV business as more cable television customers cut the cord.
Shares of Warner leapt after the business stated the brand-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 companies are thinking about alternatives for fading cable television TV organizations, a longtime cash cow where incomes are deteriorating as millions of consumers welcome streaming video.
Comcast last month revealed strategies to split the majority of its NBCUniversal cable networks into a new public company. The new business would be well capitalized and positioned to obtain other cable television networks if the industry combines, one source informed Reuters.
Bank of America research study expert Jessica Reif Ehrlich wrote that Warner Bros Discovery’s cable properties are a “very rational partner” for Comcast’s new spin-off business.
“We strongly believe there is capacity for relatively large synergies if WBD’s linear networks were integrated with Comcast SpinCo,” wrote Ehrlich, using the industry term for conventional tv.
“Further, we believe WBD’s standalone streaming and studio properties would be an appealing takeover target.”
Under the new structure for Warner Bros Discovery, the cable business 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, 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 finally settling.
“Streaming won as a behavior,” said Jonathan Miller, primary executive of digital media investment firm Integrated Media. “Now, it’s winning as an organization.”
Brightcove CEO Marc DeBevoise said Warner Bros Discovery’s brand-new business structure will distinguish growing studio and streaming possessions from lucrative however diminishing cable business, offering a clearer investment photo and most likely setting the stage for a sale or spin-off of the cable system.
The media veteran and advisor forecasted 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 acquiring the even bigger target, AT&T’s WarnerMedia, is placing the company for its next chess move, wrote MoffettNathanson expert Robert Fishman.
“The concern is not whether more pieces will be moved around or knocked off the board, or if more debt consolidation will happen– it refers who is the buyer and who is the seller,” wrote Fishman.
that circumstance during Warner Bros Discovery’s financier call last month. He stated he prepared for President-elect Donald Trump’s administration would be friendlier to deal-making, unlocking to media industry 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 care, noting Warner Bros Discovery brings $40.4 billion in debt.
“The structure modification would make it easier for WBD to sell off its linear TV networks,” eMarketer analyst Ross Benes said, describing the cable television organization. “However, finding a buyer will be challenging. The networks owe money and have no indications of development.”
In August, Warner Bros Discovery composed down the value of its TV assets by over $9 billion due to unpredictability around costs from cable television and satellite distributors and sports betting rights renewals.
This week, the media business announced a multi-year deal increasing the total fees 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 settlements with distributors. That could assist support 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)
