Shares dive 13% after reorganizing announcement

Follows course taken by Comcast’s new spin-off company

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Challenges seen in selling debt-laden direct TV networks
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(New throughout, includes information, background, remarks from market experts and analysts, updates share prices)
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By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) - Warner Bros Discovery on Thursday chose to separate its declining cable television businesses such as CNN from streaming and studio operations such as Max, preparing for a possible sale or spinoff of its TV service as more cable television customers cut the cord.
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Shares of Warner jumped after the company 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 business are considering alternatives for fading cable organizations, a longtime cash cow where earnings are eroding as countless customers embrace streaming video.

Comcast last month unveiled strategies to split the majority of its NBCUniversal cable networks into a new public business. The brand-new business would be well capitalized and positioned to acquire other cable networks if the market consolidates, one source told Reuters.

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

“We strongly believe there is potential for fairly large synergies if WBD’s direct networks were integrated with Comcast SpinCo,” wrote Ehrlich, utilizing the market term for standard television.

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

Under the new structure for Warner Bros Discovery, the cable television service including TNT, Animal Planet and CNN will be housed in a system called Global Linear Networks.
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Streaming platforms Max and Discovery+ will be under a different division in addition to film studios, consisting of Warner Bros Pictures and New Line Cinema.

The restructuring shows an inflection point for the media industry, as investments in streaming services such as Warner Bros Discovery’s Max are finally settling.

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

Brightcove CEO Marc DeBevoise said Warner Bros Discovery’s brand-new corporate structure will distinguish growing studio and streaming properties from successful but shrinking cable television company, giving a clearer financial investment image and likely setting the stage for a sale or spin-off of the cable system.
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The media veteran and adviser 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 obtaining the even bigger target, AT&T’s WarnerMedia, is placing the business for its next chess relocation, wrote MoffettNathanson analyst Robert Fishman.

“The question is not whether more pieces will be moved 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 signified that circumstance throughout Warner Bros Discovery’s investor call last month. He said he anticipated President-elect Donald Trump’s administration would be friendlier to deal-making, unlocking to media industry consolidation.

Zaslav had engaged in merger talks with Paramount late in 2015, though an offer never ever materialized, according to a regulative filing last month.

Others injected a note of care, noting Warner Bros Discovery brings $40.4 billion in financial obligation.

“The structure modification would make it much easier for WBD to sell off its direct TV networks,” eMarketer Benes said, referring to the cable business. “However, discovering a buyer will be difficult. The networks are in debt and have no signs of growth.”
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In August, Warner Bros Discovery made a note of 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.
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This week, the media business announced a multi-year deal increasing the total costs Comcast will pay to distribute Warner Bros Discovery’s networks.

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