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Shares jump 13% after restructuring statement
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Follows path taken by Comcast’s brand-new spin-off business

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Challenges seen in offering debt-laden linear TV networks

(New throughout, adds details, background, comments from industry 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 decreasing cable businesses such as CNN from streaming and studio operations such as Max, preparing for a prospective sale or spinoff of its TV service as more cable television subscribers cut the cord.

Shares of Warner jumped after the business said 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 companies are considering options for fading cable companies, a long time golden goose where incomes are eroding as millions of customers embrace streaming video.

Comcast last month unveiled strategies to divide most of its NBCUniversal cable television networks into a new public company. The new company would be well capitalized and positioned to get other cable television networks if the market combines, one source told Reuters.

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

“We highly think there is capacity for fairly substantial synergies if WBD’s linear networks were combined with Comcast SpinCo,” composed Ehrlich, utilizing the market term for traditional tv.

“Further, our company believe WBD’s standalone streaming and studio properties would be an attractive takeover target.”

Under the brand-new structure for Warner Bros Discovery, the cable television 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 different division together with movie studios, including Warner Bros Pictures and New Line Cinema.

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

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

Marc DeBevoise stated Warner Bros Discovery’s new business structure will distinguish growing studio and streaming assets from rewarding but diminishing cable television business, offering a clearer investment image and likely setting the phase for a sale or spin-off of the cable television unit.

The media veteran and advisor predicted Paramount and others may take a similar path.

CEO David Zaslav, a veteran deal-maker who led Discovery through its acquisition of Scripps Networks Interactive before getting the even bigger target, AT&T’s WarnerMedia, is placing the company for its next chess relocation, composed MoffettNathanson analyst Robert Fishman.

“The concern is not whether more pieces will be walked around or knocked off the board, or if more combination will happen-- it refers who is the buyer and who is the seller,” composed Fishman.

Zaslav indicated that circumstance throughout Warner Bros Discovery’s financier call last month. He stated he anticipated President-elect Donald Trump’s administration would be friendlier to deal-making, unlocking to media market combination.

Zaslav had participated in merger talks with Paramount late last year, though a deal never ever materialized, according to a regulatory filing last month.

Others injected a note of caution, keeping in mind Warner Bros Discovery brings $40.4 billion in financial obligation.

“The structure change would make it much easier for WBD to sell off its linear TV networks,” eMarketer analyst Ross Benes said, referring to the cable company. “However, finding a purchaser will be challenging. The networks are in debt 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 uncertainty around charges from cable and satellite suppliers and sports betting rights renewals.

This week, the media business announced a multi-year offer increasing the total costs Comcast will pay to distribute 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 service provider Charter, will be a template for future settlements with distributors. That could assist stabilize pricing for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles