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Shares dive 13% after reorganizing announcement

Follows course taken by Comcast’s brand-new spin-off business
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Challenges seen in selling debt-laden direct TV networks

(New throughout, includes information, background, comments from industry experts 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 services such as CNN from streaming and studio operations such as Max, preparing for a prospective sale or spinoff of its TV organization as more cable television subscribers cut the cable.

Shares of Warner jumped after the business stated the brand-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 thinking about choices for fading cable TV services, a longtime cash cow where revenues are wearing down as millions of customers embrace streaming video.

Comcast last month unveiled strategies to split most of its NBCUniversal cable networks into a brand-new public company. The new company would be well capitalized and placed to get other cable television networks if the industry consolidates, one source informed Reuters.

Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery’s cable television service properties are a “extremely rational partner” for Comcast’s new spin-off business.

“We highly believe there is capacity for relatively sizable synergies if WBD’s direct networks were combined with Comcast SpinCo,” wrote Ehrlich, utilizing the industry term for conventional tv.

“Further, we think WBD’s standalone streaming and studio possessions would be an attractive takeover target.”

Under the new structure for Warner Bros Discovery, the cable 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 separate department together with movie 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 lastly settling.

“Streaming won as a behavior,” stated Jonathan Miller, primary executive of digital media financial investment business Integrated Media. “Now, it’s winning as a service.”

Brightcove CEO Marc DeBevoise said Warner Bros Discovery’s brand-new business structure will distinguish growing studio and streaming assets from successful but TV service, offering 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 adviser predicted 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 obtaining the even larger target, AT&T’s WarnerMedia, is placing the company for its next chess move, composed MoffettNathanson expert Robert Fishman.

“The question is not whether more pieces will be moved around or knocked off the board, or if further consolidation will happen-- it refers who is the purchaser and who is the seller,” composed Fishman.

Zaslav signaled that situation throughout Warner Bros Discovery’s financier 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 debt consolidation.

Zaslav had participated in merger talks with Paramount late in 2015, though an offer never ever 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 change would make it simpler for WBD to offer off its linear TV networks,” eMarketer expert Ross Benes said, referring to the cable television business. “However, discovering a purchaser will be challenging. The networks owe money and have no indications of growth.”

In August, Warner Bros Discovery made a note of the worth of its TV possessions by over $9 billion due to unpredictability around charges from cable television and satellite suppliers and sports betting rights renewals.

Today, the media business announced a multi-year offer increasing the general charges Comcast will pay to disperse Warner Bros Discovery’s networks.

Warner Bros Discovery is sports betting the Comcast agreement, together with a deal reached this year with cable television and broadband company Charter, will be a design template for future settlements with suppliers. That might help stabilize pricing for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles