Warner Bros. Discovery Inc., the parent company of CNN and TNT, reported a $9.1 billion writedown on its traditional TV networks in the second quarter. This charge came after the company, formed in 2022 via Discovery Inc.’s acquisition of WarnerMedia, reassessed the value of cable channels like CNN and TNT. This determined that it is no longer worth as much as they were at the time of the $42 billion merger. Following this announcement, Warner Bros. shares dropped from 9.9% to $6.95 in extended trading, the lowest since the merged company’s stock began trading in April 2022.
This move follows last month’s decision taken by the NBA to drop Warner Bros. as a broadcast partner, instead awarding a $76 billion, 11-year media rights deal to Walt Disney Co., Comcast Corp., and Amazon.com Inc. In response, Warner Bros. filed a lawsuit against the NBA, alleging breach of contract. The writedown reflects the ongoing shift of viewers from traditional cable networks like CNN to streaming platforms, which has majorly impacted advertising revenue and subscriber fees, which is the main revenue for conventional TV.
These industry shifts have affected other media companies as well. Disney, which reported its third-quarter results earlier on Wednesday, also saw declines in linear television advertising sales and subscribers. With regards to streaming, Warner Bros. added 3.6 million new subscribers, surpassing Wall Street’s expectations of 1.89 million, bringing the total up to 103.3 million. Ad revenue from streaming doubled to $240 million. This went beyond the analysts’ estimation of $191.4 million. Over the past year, Warner Bros. has cut more than 2,000 positions and removed over 100 jobs at CNN last month. The company also raised subscription prices for its Max streaming service in June.
For the quarter, Warner Bros. reported a loss of $10 billion. This loss includes additional charges of $2.1 billion with regards to its merger. Revenue for the quarter fell from 6.2% to $9.71 billion. Warner Bros. has been involved in several controversial and criticized merger deals under different management teams for the past 20 years. This includes the $124 billion merger of Time Warner with America Online in 2001 and the subsequent $87 billion acquisition of Time Warner by AT&T Inc. in 2018.
Here is what the CEO David Zaslay wants to say:
“Two years ago market valuations and prevailing conditions for legacy media companies were quite different than they are today,” CEO David Zaslav said on a call with investors on Wednesday. “This impairment acknowledges this and better aligns our carrying values with our future outlook.At this point, we’ve handed it off to our lawyers,” Zaslav said on the call. “We have confidence in our position.”
To know more: https://s201.q4cdn.com/336605034/files/doc_earnings/2024/q2/earnings-result/WBD-2Q24-Earnings-Release.pdf
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