Warner Bros Discovery Sets Stage For Potential Cable Deal By
Shares dive 13% after reorganizing 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, adds information, background, comments from industry insiders and experts, updates share prices)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
Dec 12 (Reuters) – Warner Bros Discovery on Thursday decided to separate its declining cable television TV companies such as CNN from streaming and studio operations such as Max, laying the foundation for a possible sale or spinoff of its TV business as more cable television subscribers cut the cord.
Shares of Warner jumped after the business stated the brand-new structure would be more deal friendly and it to finish 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 TV organizations, a long time golden goose where profits are deteriorating as countless consumers embrace streaming video.
Comcast last month unveiled plans to divide the majority of its NBCUniversal cable networks into a brand-new public company. The brand-new business would be well capitalized and positioned to acquire other cable networks if the industry combines, one source informed Reuters.
Bank of America research analyst Jessica Reif Ehrlich wrote that Warner Bros Discovery’s cable properties are a « very rational partner » for Comcast’s new spin-off company.
« We strongly think there is potential for fairly substantial synergies if WBD’s direct networks were integrated with Comcast SpinCo, » wrote Ehrlich, using the industry term for conventional tv.
« 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 television TV service 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 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 paying off.
« Streaming won as a behavior, » said Jonathan Miller, chief executive of digital media financial investment company Integrated Media. « Now, it’s winning as a service. »
Brightcove CEO Marc DeBevoise stated Warner Bros Discovery’s new corporate structure will differentiate growing studio and streaming possessions from successful but diminishing cable organization, providing a clearer investment image and likely setting the stage for a sale or spin-off of the cable television unit.
The media veteran and advisor anticipated 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 getting the even bigger target, AT&T’s WarnerMedia, is positioning the business for its next chess move, composed MoffettNathanson analyst Robert Fishman.
« The concern is not whether more pieces will be moved or knocked off the board, or if additional combination will occur– it is a matter of who is the purchaser and who is the seller, » composed Fishman.
Zaslav indicated that circumstance during Warner Bros Discovery’s investor call last month. He stated he prepared for President-elect Donald Trump’s administration would be friendlier to deal-making, opening the door to media industry consolidation.
Zaslav had actually participated in merger talks with Paramount late last year, though an offer never materialized, according to a regulatory filing last month.
Others injected a note of caution, noting Warner Bros Discovery brings $40.4 billion in debt.
« The structure modification would make it much easier for WBD to sell off its linear TV networks, » eMarketer expert Ross Benes said, referring to the cable service. « However, finding a buyer will be challenging. The networks owe money and have no indications of growth. »
In August, Warner Bros Discovery wrote down the value of its TV properties by over $9 billion due to uncertainty around charges from cable television and satellite suppliers and sports betting rights renewals.
This week, the media company revealed a multi-year deal increasing the overall charges Comcast will pay to disperse Warner Bros Discovery’s networks.
Warner Bros Discovery is wagering the Comcast contract, together with an offer reached this year with cable television and broadband provider Charter, will be a design template for future negotiations with suppliers. That could assist support 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)
