Shares jump 13% after restructuring statement

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

*

Challenges seen in selling debt-laden direct TV networks

(New throughout, adds information, background, comments from market 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 organizations such as CNN from streaming and studio operations such as Max, laying the groundwork for a potential sale or spinoff of its TV company as more cable television customers 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 TV companies, a long time cash cow where profits are eroding as countless customers embrace streaming video.

Comcast last month revealed plans to split the majority of its NBCUniversal cable networks into a new public business. The brand-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 analyst Jessica Reif Ehrlich composed that Warner Bros Discovery's cable tv assets are a "extremely rational partner" for Comcast's brand-new spin-off company.

"We highly think there is capacity for fairly large synergies if WBD's linear networks were integrated with Comcast SpinCo," wrote Ehrlich, using the industry term for traditional tv.

"Further, our company believe WBD's standalone streaming and studio assets would be an appealing takeover target."

Under the brand-new structure for Warner Bros Discovery, the cable TV organization 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 separate division together with movie studios, including Warner Bros Pictures and New Line Cinema.

The restructuring shows an inflection point for the media market, 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, primary executive of digital media investment company Integrated Media. "Now, it's winning as a service."

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

The media veteran and consultant 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 acquiring the even bigger target, AT&T's WarnerMedia, is placing the business for its next chess move, composed MoffettNathanson analyst Robert Fishman.

"The question is not whether more pieces will be moved around or knocked off the board, or if more consolidation will take place-- it refers who is the buyer and who is the seller," wrote Fishman.

Zaslav indicated that scenario throughout 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 participated in merger talks with Paramount late last year, though a deal never ever emerged, according to a regulatory 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 easier for WBD to sell its linear TV networks," eMarketer analyst Ross Benes stated, describing the cable television service. "However, finding a purchaser will be tough. The networks owe money and have no indications of growth."

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

This week, 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 sports betting the Comcast contract, together with an offer reached this year with cable and broadband provider Charter, will be a template for future settlements with suppliers. That could assist stabilize 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)