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Shares jump 13% after restructuring announcement
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Follows path taken by Comcast's new spin-off company
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Challenges seen in offering debt-laden direct TV networks
(New throughout, adds information, background, remarks from market experts and analysts, updates share costs)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
Dec 12 (Reuters) - Warner Bros Discovery on Thursday decided to separate its declining cable TV organizations such as CNN from streaming and studio operations such as Max, laying the groundwork for a possible sale or spinoff of its TV organization as more cable customers cut the cord.
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Shares of Warner jumped after the company said the brand-new structure would be more deal friendly and it anticipated to complete the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.
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Media companies are considering alternatives for fading cable television services, a long time cash cow where earnings are deteriorating as millions of customers welcome streaming video.
Comcast last month unveiled strategies to divide most of its NBCUniversal cable networks into a new public business. The brand-new company would be well capitalized and positioned to obtain other cable networks if the industry consolidates, one source informed Reuters.
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Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable properties are a "extremely logical partner" for Comcast's new spin-off company.
"We highly think there is potential for relatively substantial synergies if WBD's direct networks were integrated with Comcast SpinCo," wrote Ehrlich, using the industry term for standard .
"Further, we think WBD's standalone streaming and studio assets would be an appealing takeover target."
Under the new structure for Warner Bros Discovery, the cable TV 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, consisting of 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 habits," stated 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 corporate structure will separate growing studio and streaming properties from lucrative however shrinking cable television TV business, giving a clearer investment picture and most likely setting the phase for a sale or spin-off of the cable television unit.
The media veteran and adviser forecasted Paramount and others might 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 company for its next chess relocation, wrote MoffettNathanson expert Robert Fishman.
"The question is not whether more pieces will be moved or knocked off the board, or if additional combination will occur-- it refers who is the purchaser and who is the seller," composed Fishman.
Zaslav signified 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 debt consolidation.
Zaslav had participated in merger talks with Paramount late last year, though an offer never ever materialized, according to a regulatory filing last month.
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 sell its direct TV networks," eMarketer expert Ross Benes said, referring to the cable television service. "However, discovering a purchaser will be challenging. The networks are in financial obligation and have no indications of growth."
In August, Warner Bros Discovery made a note of the value of its TV assets by over $9 billion due to uncertainty around costs from cable and satellite distributors and sports betting rights renewals.
Today, the media business revealed a multi-year deal increasing the general fees Comcast will pay to disperse Warner Bros Discovery's networks.
Warner Bros Discovery is sports betting the Comcast arrangement, together with a deal reached this year with cable and broadband service provider Charter, will be a template for future settlements 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
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