Shares dive 13% after restructuring announcement

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

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Challenges seen in offering debt-laden linear TV networks

(New throughout, adds details, background, remarks from industry experts 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 declining cable TV services such as CNN from streaming and studio operations such as Max, laying the foundation for a prospective sale or spinoff of its TV business as more cable television subscribers cut the cable.

Shares of Warner leapt after the business stated the new structure would be more deal friendly and it expected to finish the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.

Media companies are considering alternatives for fading cable television companies, a longtime golden goose where earnings are eroding as millions of consumers welcome streaming video.

Comcast last month unveiled plans to divide most of its NBCUniversal cable television networks into a new public business. The new business would be well capitalized and placed to get other cable networks if the market combines, one source told Reuters.

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

"We highly believe there is potential for relatively large synergies if WBD's linear networks were integrated with Comcast SpinCo," wrote Ehrlich, using the market term for standard television.

"Further, we think WBD's standalone streaming and studio possessions would be an attractive takeover target."

Under the brand-new structure for Warner Bros Discovery, the cable company including TNT, Animal Planet and CNN will be housed in a system called Global Linear Networks.

Streaming platforms Max and Discovery+ will be under a different division in addition to 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 finally paying off.

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

Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's new business structure will separate growing studio and streaming assets from rewarding but diminishing cable television service, giving a clearer investment picture and likely setting the phase for a sale or spin-off of the cable system.

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 acquiring the even larger target, AT&T's WarnerMedia, is positioning 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 purchaser and who is the seller," composed Fishman.

Zaslav signified that scenario during Warner Bros Discovery's investor call last month. He stated he anticipated President-elect Donald Trump's administration would be friendlier to deal-making, unlocking to media market consolidation.

Zaslav had taken part 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, keeping in mind 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 stated, describing the cable television organization. "However, finding a purchaser will be difficult. The networks are in debt and have no indications of development."

In August, Warner Bros Discovery documented the value of its TV possessions by over $9 billion due to unpredictability around charges from cable television and satellite distributors and sports betting rights renewals.

This week, the media company revealed a multi-year offer increasing the overall costs 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 and broadband provider Charter, will be a design template for future negotiations 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; Editing by Shilpi Majumdar, Arun Koyyur, Keith Weir and David Gregorio)