Warner Bros. Discovery’s $9.1 Billion Writedown Signals Dire Future for CNN and Other Networks
Warner Bros. Discovery (NYSE: WBD), the media conglomerate behind networks such as CNN, TNT, and TBS, has recently disclosed a staggering $9.1 billion writedown on its traditional TV networks. This move signals a significant reevaluation of the value of these assets, initially acquired as part of the 2021 merger between Discovery Inc. and the company formerly known as Time Warner.
For the quarter ending June 30, 2024, Warner Bros. Discovery reported a net loss of $9.986 billion, a dramatic increase from the $1.240 billion loss reported in the same quarter of the previous year. The company’s total revenues fell to $9.713 billion, marking a 6% decline from the $10.358 billion reported in the same period in 2023.
Adjusted EBITDA, a measure of operating performance, also dropped by 16% to $1.795 billion from $2.149 billion. Cash provided by operating activities plummeted by 39%, and free cash flow decreased by 43%.
The Networks segment, despite being the largest revenue generator for WBD, has not been immune to the financial downturn. The segment’s total revenues decreased by 8% to $5.272 billion from $5.758 billion in the previous year. The decline was driven by several factors: distribution revenue fell by 9% to $2.675 billion, down from $2.941 billion in 2023. This decrease is indicative of the shrinking subscriber base for traditional cable networks as consumers increasingly opt for streaming services.
Advertising revenue also saw a significant decline, dropping by 10% to $2.214 billion from $2.448 billion. The loss of advertising revenue is a critical blow to the Networks segment, which relies heavily on ad sales for its income.
Adjusted EBITDA for the Networks segment also fell by 8% to $1.998 billion from $2.166 billion in the previous year.
“Two years ago, market valuations and prevailing conditions for legacy media companies were quite different than they are today. This impairment acknowledges this and better aligns our carrying values with our future outlook,” CEO David Zaslav stated during a recent investor call.
In contrast, content revenue experienced a modest increase of 5%, rising to $299 million from $284 million in the previous year.
The writedown follows the NBA’s decision to award a new $76 billion, 11-year media rights deal to competitors such as Walt Disney, Comcast, and Amazon.com, which has significantly impacted WBD’s future broadcasting plans.
Investors reacted negatively to the news, pushing WBD’s stock down by over 8% following the announcement. Shares of Warner Bros. Discovery fell as much as 9.9% to $6.95, the lowest since the merged company began trading in April 2022.
The writedown and financial woes at Warner Bros. Discovery highlight a broader trend in the media industry. As more viewers migrate to streaming platforms, traditional cable networks are facing declining advertising revenues and subscriber fees. This shift is forcing major media companies to rethink their strategies and realign their assets with the changing market dynamics.
For example, Disney, another major player in the industry, recently reported declines in linear television advertising sales and subscribers, mirroring the challenges faced by Warner Bros. Discovery.
In response to these financial challenges, Zaslav mentioned that the company is exploring various strategic options, including selling smaller chunks of the business. This could potentially involve divesting a Polish broadcasting company or parts of its gaming business.
Despite the setbacks, Zaslav remains optimistic about the company’s future in the digital space, even as traditional network revenues continue to decline.
Information for this story was found via Business Insider, Zero Hedge, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
