Shares dive 13% after reorganizing announcement

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

*

Challenges seen in selling debt-laden direct TV networks

(New throughout, adds details, 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 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 subscribers cut the cable.

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

Media companies are thinking about options for fading cable services, a long time cash cow where revenues are deteriorating as millions of consumers accept streaming video.

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

Bank of America research study analyst Jessica Reif Ehrlich wrote that Warner Bros Discovery's cable television assets are a "extremely logical partner" for Comcast's new spin-off business.

"We strongly think there is capacity for relatively sizable synergies if WBD's linear networks were integrated with Comcast SpinCo," composed Ehrlich, utilizing the industry term for standard television.

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

Under the new structure for Warner Bros Discovery, the cable television service including 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 department together with movie studios, consisting of Warner Bros Pictures and New Line Cinema.

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

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

Brightcove CEO Marc DeBevoise said Warner Bros Discovery's new business structure will differentiate growing studio and streaming assets from profitable but shrinking cable television company, giving a clearer investment photo and most likely setting the phase for a sale or spin-off of the cable television unit.

The media veteran and adviser anticipated Paramount and others may take a similar 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 business for its next chess move, wrote MoffettNathanson analyst Robert Fishman.

"The concern is not whether more pieces will be walked around or knocked off the board, or if further combination will occur-- it is a matter of who is the buyer and who is the seller," composed Fishman.

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

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

Others injected a note of caution, noting 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 analyst Ross Benes stated, referring to the cable television TV company. "However, finding a buyer will be tough. The networks owe money and have no indications of growth."

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

This week, the media business revealed a multi-year deal increasing the general costs Comcast will pay to distribute Warner Bros Discovery's networks.

Warner Bros Discovery is wagering the Comcast contract, together with a deal reached this year with cable and broadband company Charter, will be a design template for future settlements with suppliers. 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)