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Shares jump 13% after restructuring announcement

Follows path taken by Comcast's brand-new spin-off company

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Challenges seen in selling debt-laden direct TV networks

(New throughout, includes information, background, comments from market insiders and experts, updates share rates)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

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

Shares of Warner jumped after the company 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%.

Media business are thinking about choices for fading cable television businesses, a longtime golden goose where profits are wearing down as countless consumers accept streaming video.
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Comcast last month unveiled plans to split many of its NBCUniversal cable television networks into a brand-new public business. The brand-new company would be well capitalized and placed to acquire other cable networks if the market combines, one source told Reuters.

Bank of America research study expert Jessica Reif Ehrlich composed that Warner Bros Discovery's cable television service properties are a "really sensible partner" for Comcast's new spin-off company.

"We strongly think there is potential for fairly large synergies if WBD's direct networks were integrated with Comcast SpinCo," wrote Ehrlich, utilizing the market term for conventional television.

"Further, we believe WBD's standalone streaming and studio assets would be an attractive takeover target."
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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 in addition to film studios, including Warner Bros Pictures and New Line Cinema.

The restructuring reflects an inflection point for the media industry, as investments in streaming services such as Warner Bros Discovery's Max are finally paying off.

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

Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's brand-new business structure will distinguish growing studio and streaming properties from successful but shrinking cable television company, offering a clearer financial investment photo and most likely setting the phase for a sale or spin-off of the cable system.
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The media veteran and consultant anticipated Paramount and others may take a comparable path.

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, wrote MoffettNathanson analyst Robert Fishman.

"The concern is not whether more pieces will be moved around or knocked off the board, or if further consolidation will happen-- it is a matter of who is the buyer and who is the seller," wrote Fishman.

Zaslav signified that situation during Warner Bros Discovery's investor call last month. He stated he expected President-elect Donald Trump's administration would be friendlier to deal-making, opening the door to media industry debt consolidation.

Zaslav had actually participated in merger talks with Paramount late in 2015, though an offer never emerged, according to a regulatory filing last month.

Others injected a note of care, keeping in mind Warner Bros Discovery carries $40.4 billion in debt.

"The structure change would make it much easier for WBD to sell off its linear TV networks," eMarketer analyst Ross Benes stated, referring to the cable TV organization. "However, finding a purchaser will be challenging. The networks owe money and have no signs of development."

In August, Warner Bros Discovery documented the worth of its TV properties by over $9 billion due to uncertainty around charges from cable television and satellite distributors and sports betting rights renewals.
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This week, the media company announced a multi-year deal increasing the general fees Comcast will pay to disperse Warner Bros Discovery's networks.

Warner Bros Discovery is sports betting the Comcast arrangement, together with an this year with cable television and broadband company Charter, will be a template for future settlements with distributors. That might help 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)