Shares dive 13% after restructuring announcement

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

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Challenges seen in offering debt-laden linear TV networks

(New throughout, includes information, background, remarks from market insiders and analysts, updates share rates)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

Dec 12 (Reuters) - Warner Bros Discovery on Thursday decided to separate its decreasing cable TV services such as CNN from streaming and studio operations such as Max, laying the foundation for a potential sale or spinoff of its TV service as more cable 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 business are considering alternatives for fading cable television organizations, a longtime cash cow where incomes are eroding as millions of consumers welcome streaming video.

Comcast last month unveiled plans to split many of its NBCUniversal cable television networks into a new public company. The new company would be well capitalized and positioned to acquire other cable television networks if the industry combines, one source told Reuters.

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

"We strongly think there is potential for fairly substantial synergies if WBD's linear networks were integrated with Comcast SpinCo," composed Ehrlich, using the market term for traditional 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 separate department together with movie studios, consisting of Warner Bros Pictures and New Line Cinema.

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

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

Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's brand-new corporate structure will distinguish growing studio and streaming properties from profitable however diminishing cable television company, giving a clearer financial investment picture and likely setting the phase for a sale or spin-off of the cable unit.

The media veteran and consultant anticipated 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 company for its next chess relocation, composed MoffettNathanson analyst Robert Fishman.

"The concern is not whether more pieces will be moved around or knocked off the board, or if additional consolidation will happen-- it is a matter of who is the purchaser 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, unlocking to media industry combination.

Zaslav had participated in merger talks with Paramount late last year, though a deal never ever emerged, according to a regulative filing last month.

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

"The structure modification would make it simpler for WBD to offer off its direct TV networks," eMarketer expert Ross Benes said, describing the cable organization. "However, discovering a buyer will be challenging. The networks owe money and have no signs of growth."

In August, Warner Bros Discovery wrote down 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.

Today, the media company revealed a multi-year deal increasing the total costs Comcast will pay to disperse Warner Bros Discovery's networks.

Warner Bros Discovery is wagering the Comcast contract, together with an offer reached this year with cable television and broadband provider Charter, will be a template for future negotiations with distributors. 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)