Shares dive 13% after announcement
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Follows course taken by Comcast's brand-new spin-off business

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Challenges seen in offering debt-laden direct TV networks

(New throughout, includes information, background, comments from industry insiders and experts, updates share costs)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) - Warner Bros Discovery on Thursday chose to separate its decreasing cable companies such as CNN from streaming and studio operations such as Max, laying the foundation for a prospective sale or spinoff of its TV organization as more cable subscribers cut the cord.

Shares of Warner jumped after the business stated 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%.
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Media companies are considering choices for fading cable companies, a longtime golden goose where earnings are deteriorating as countless consumers embrace streaming video.

Comcast last month revealed strategies to divide the majority of its NBCUniversal cable networks into a new public company. The brand-new business would be well capitalized and placed to obtain other cable networks if the industry combines, one source informed Reuters.

Bank of America research expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable assets are a "really logical partner" for Comcast's brand-new spin-off company.

"We highly believe there is capacity for fairly large synergies if WBD's linear networks were integrated with Comcast SpinCo," wrote Ehrlich, using 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 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 different division along with 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 lastly paying off.

"Streaming won as a habits," stated Jonathan Miller, primary executive of digital media investment firm Integrated Media. "Now, it's winning as a company."

Brightcove CEO Marc DeBevoise said Warner Bros Discovery's new corporate structure will differentiate growing studio and streaming possessions from lucrative but diminishing cable service, offering a clearer financial investment photo and likely setting the phase for a sale or spin-off of the cable unit.

The media veteran and advisor predicted Paramount and others might take a comparable 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 company for its next chess move, wrote MoffettNathanson expert Robert Fishman.

"The concern is not whether more pieces will be moved around or knocked off the board, or if further combination will occur-- it refers who is the purchaser and who is the seller," composed Fishman.

Zaslav signified that situation 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, opening the door to media market combination.

Zaslav had engaged in merger talks with Paramount late in 2015, though an offer never ever emerged, 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 change would make it simpler for WBD to sell its direct TV networks," eMarketer analyst Ross Benes said, describing the cable company. "However, finding a buyer will be tough. The networks are in financial obligation and have no indications of development."

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

Warner Bros Discovery is sports betting the Comcast contract, together with an offer reached this year with cable television and broadband provider Charter, will be a template for future settlements with suppliers. That might help stabilize rates 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)