Warner Bros Discovery Sets Stage For Potential Cable Deal By
Shares dive 13% after reorganizing statement
Follows path taken by Comcast’s new spin-off company
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Challenges seen in offering debt-laden linear TV networks
(New throughout, adds information, background, remarks from market insiders and experts, updates share prices)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
Dec 12 (Reuters) – Warner Bros Discovery on Thursday chose to separate its declining cable television TV companies 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 stated the new structure would be more deal friendly and it expected to complete the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.
Media business are considering options for fading cable television companies, a long time money cow where revenues are wearing down as millions of consumers accept streaming video.
Comcast last month revealed strategies to split the majority of its NBCUniversal cable television networks into a new public company. The brand-new business would be well capitalized and positioned to obtain other cable networks if the industry consolidates, one source informed Reuters.
Bank of America research analyst Jessica Reif Ehrlich wrote that Warner Bros Discovery’s cable tv possessions are a „very sensible partner“ for Comcast’s brand-new .
„We highly believe there is potential for fairly large synergies if WBD’s linear networks were integrated with Comcast SpinCo,“ wrote Ehrlich, using the market term for standard tv.
„Further, our company believe WBD’s standalone streaming and studio assets would be an appealing takeover target.“
Under the brand-new structure for Warner Bros Discovery, the cable business consisting of TNT, Animal Planet and CNN will be housed in an unit called Global Linear Networks.
Streaming platforms Max and Discovery+ will be under a separate department along 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 lastly paying off.
„Streaming won as a habits,“ said Jonathan Miller, chief executive of digital media financial investment company 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 shrinking cable service, providing a clearer financial investment image and most likely setting the phase for a sale or spin-off of the cable system.
The media veteran and advisor anticipated Paramount and others may 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 positioning the company for its next chess move, composed MoffettNathanson expert Robert Fishman.
„The concern is not whether more pieces will be moved around or knocked off the board, or if further debt consolidation will occur– it is a matter of who is the buyer and who is the seller,“ wrote Fishman.
Zaslav signaled that circumstance 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 industry combination.
Zaslav had engaged in merger talks with Paramount late last year, though an offer never emerged, according to a regulatory filing last month.
Others injected a note of caution, noting Warner Bros Discovery carries $40.4 billion in debt.
„The structure modification would make it simpler for WBD to sell off its linear TV networks,“ eMarketer expert Ross Benes stated, describing the cable television business. „However, finding a buyer will be challenging. The networks owe money and have no indications of development.“
In August, Warner Bros Discovery made a note of the worth of its TV possessions by over $9 billion due to uncertainty around costs from cable television and satellite suppliers 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 contract, together with an offer reached this year with cable television and broadband supplier Charter, will be a design 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)
