Shares dive 13% after reorganizing announcement

Follows course taken by Comcast's new spin-off business

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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 declining cable television services such as CNN from streaming and studio operations such as Max, preparing for a prospective sale or spinoff of its TV business as more cable television subscribers cut the cable.

Shares of Warner jumped after the company 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 thinking about alternatives for fading cable services, a long time golden goose where earnings are eroding as millions of consumers welcome streaming video.

Comcast last month revealed strategies to split the majority of its NBCUniversal cable networks into a new public business. The new business would be well capitalized and placed to acquire other cable television networks if the industry consolidates, one source told Reuters.

Bank of America research expert Jessica Reif Ehrlich wrote that Warner Bros Discovery's cable possessions are a "really rational partner" for Comcast's new spin-off business.

"We strongly think there is potential for fairly substantial synergies if WBD's direct networks were integrated with Comcast SpinCo," composed Ehrlich, using the industry term for conventional television.

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

Under the new structure for Warner Bros Discovery, the cable television business 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 movie studios, consisting of Warner Bros Pictures and New Line Cinema.

The restructuring shows 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," said Jonathan Miller, president of digital media financial investment business Integrated Media. "Now, it's winning as a company."

Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's brand-new business structure will separate growing studio and streaming possessions from profitable however shrinking cable organization, providing a clearer financial investment photo and most likely setting the stage for a sale or spin-off of the cable system.

The media veteran and advisor predicted Paramount and others may take a similar path.

CEO David Zaslav, a veteran deal-maker who led Discovery through its acquisition of Scripps Networks Interactive before getting the even larger target, AT&T's WarnerMedia, is positioning the business for its next chess relocation, composed MoffettNathanson analyst Robert Fishman.

"The question is not whether more pieces will be moved or knocked off the board, or if more combination will happen-- it is a matter of who is the purchaser and who is the seller," wrote Fishman.

Zaslav signified that circumstance during 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 market debt consolidation.

Zaslav had actually 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, keeping in mind Warner Bros Discovery carries $40.4 billion in debt.

"The structure modification would make it much easier for WBD to offer off its linear TV networks," eMarketer expert Ross Benes said, referring to the cable television TV company. "However, finding a purchaser will be difficult. The networks owe money and have no indications of growth."

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

This week, the media business announced a multi-year deal increasing the overall charges Comcast will pay to disperse Warner Bros Discovery's networks.

Warner Bros Discovery is wagering the Comcast agreement, 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 support 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)