1 Warner Bros Discovery Sets Stage For Potential Cable Deal By
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Shares dive 13% after restructuring statement
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Follows course taken by Comcast's brand-new spin-off business
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Challenges seen in selling debt-laden linear TV networks

(New throughout, includes information, background, remarks from industry insiders and analysts, updates share rates)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) - Warner Bros Discovery on Thursday chose to separate its declining cable television organizations such as CNN from streaming and studio operations such as Max, laying the groundwork for a possible sale or spinoff of its TV service as more cable television customers cut the cord.

Shares of Warner jumped after the company said 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 options for fading cable television services, a long time golden goose where profits are eroding as millions of customers accept streaming video.

Comcast last month revealed plans to divide the majority of its NBCUniversal cable television networks into a brand-new public company. The brand-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 assets are a "very sensible partner" for Comcast's new spin-off business.

"We strongly believe there is capacity for fairly sizable synergies if WBD's linear networks were combined with Comcast SpinCo," wrote Ehrlich, using the market term for conventional television.

"Further, we believe WBD's standalone streaming and studio possessions would be an attractive takeover target."

Under the brand-new structure for Warner Bros Discovery, the cable TV 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 in addition to film studios, consisting of 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 settling.

"Streaming won as a behavior," stated Jonathan Miller, president of digital media investment firm Integrated Media. "Now, it's winning as a service."

Brightcove CEO Marc DeBevoise said Warner Bros Discovery's brand-new corporate structure will differentiate growing studio and streaming possessions from profitable but diminishing cable television business, providing a clearer financial investment photo and most likely setting the stage for a sale or spin-off of the cable television unit.

The media veteran and adviser forecasted 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 positioning the business for its next chess relocation, composed MoffettNathanson analyst Robert Fishman.

"The concern is not whether more pieces will be moved around or knocked off the board, or if additional combination will happen-- it is a matter of who is the purchaser and who is the seller," composed Fishman.

Zaslav signaled that scenario during Warner Bros Discovery's financier call last month. He said he anticipated President-elect Donald Trump's administration would be friendlier to deal-making, opening the door to media industry combination.

Zaslav had taken part 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 care, noting Warner Bros Discovery carries $40.4 billion in debt.

"The structure change would make it much easier for WBD to sell off its direct TV networks," eMarketer expert Ross Benes said, describing the cable television organization. "However, finding a purchaser will be challenging. The networks owe money and have no signs of growth."

In August, Warner Bros Discovery made a note of the value of its TV properties by over $9 billion due to unpredictability around charges from cable and satellite suppliers and sports betting rights renewals.
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This week, the media business revealed a multi-year offer increasing the overall costs Comcast will pay to distribute Warner Bros Discovery's networks.

Warner Bros Discovery is wagering the Comcast agreement, together with an offer reached this year with cable television and broadband service provider Charter, will be a template for future negotiations with suppliers. That might assist stabilize prices for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles