Shares jump 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, comments from market insiders and experts, updates share prices)

By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni

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

Shares of Warner leapt 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 companies are thinking about options for fading cable television TV services, a long time cash cow where incomes are wearing down as countless consumers accept streaming video.

Comcast last month revealed plans to divide many of its NBCUniversal cable networks into a new public business. The brand-new company would be well capitalized and positioned to acquire other cable 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 "extremely logical partner" for Comcast's brand-new spin-off company.

"We strongly think there is potential for fairly large synergies if WBD's direct networks were combined with Comcast SpinCo," composed Ehrlich, using the market term for traditional tv.

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

Under the new structure for Warner Bros Discovery, the cable TV 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 separate division in addition to film studios, including 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 lastly paying off.

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

Brightcove CEO Marc DeBevoise stated Warner Bros Discovery's new business structure will distinguish growing studio and streaming assets from lucrative but shrinking cable television business, providing a clearer investment photo and likely setting the stage for a sale or spin-off of the cable television system.

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 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 additional combination will happen-- it refers who is the purchaser and who is the seller," composed Fishman.

Zaslav signaled that situation during Warner Bros Discovery's investor call last month. He said he prepared for President-elect Donald Trump's administration would be friendlier to deal-making, opening the door to media market combination.

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

Others injected a note of caution, noting Warner Bros Discovery brings $40.4 billion in debt.

"The structure modification would make it much easier for WBD to offer off its linear TV networks," eMarketer analyst Ross Benes said, describing the cable television service. "However, discovering a purchaser will be tough. The networks owe money and have no signs of development."

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

Today, the media business announced a multi-year deal increasing the total costs Comcast will pay to distribute Warner Bros Discovery's networks.

Warner Bros Discovery is wagering the Comcast arrangement, together with a deal reached this year with cable and broadband service provider Charter, will be a template for future settlements with distributors. That could 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)