Warner Bros. Discovery just realized its TV networks are worth $9.1 billion less than it originally thought, leading to a net loss of $10 billion in the second quarter of 2024.
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The massive plummet in valuation is being recognized as a “non-cash goodwill impairment charge” primarily coming from the “Networks” section of the company. That must have been one eye-opening internal audit.
WBD blames the devastating change in value to the “difference between market capitalization and book value” due to a soft U.S. advertising market and “uncertainty” surrounding future carriage deals. And oh yeah, the loss of the NBA certainly doesn’t help.
WBD CEO David Zaslav said on Wednesday’s earnings call that market valuations two years ago when they first merged in April 2022, were “quite different than they are today,” and doing this “acknowledges” that change in value and “better aligns” them with their goals moving forward. CFO Gunnar Wiedenfels said he’s not “dismissive of the magnitude” of the impairment, but this represents the value shift toward streaming, which the company still believes has strong momentum.
Warner Bros. Discovery just lost its rights to broadcast the NBA beginning after next season, and the company is in fact suing the NBA to retain the rights, saying that it matched Amazon’s offer for the NBA and that the NBA isn’t legally able to decline them if they matched.
That’s a big chunk of the pie, but not the only factor leading to that steep loss of value, as the decline of advertising for its linear networks has taken a toll on all the Discovery channels and the Turner cable channels.
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WBD also reported another write down of $2.1 billion of “pre-tax acquisition-related amortization of
intangibles, content fair value step-up, and restructuring expenses.”
The good news was that streaming perked up, with all of its DTC offerings between Max, HBO, and Discovery+ adding 3.6 million subscribers in the quarter for a total of 103.3 million subs. The direct-to-consumer segment however swung to a $107 million loss.
Since Warner Bros. Discovery formed as a merged company a little over two years ago in April 2022, the company’s stock has fallen nearly 70 percent. The company’s stock fell another 8 percent in after hours trading and is now approaching an all-time low.
Late last month, a report came out that Warner Bros. Discovery was exploring a potential spinoff of its film and TV studio and streaming from its linear TV channels. Much of WBD’s $40 billion in debt lies with the linear channels, so a divorce would free up the studio segment to unlock more value, but it also comes with major risks, with some analysts completely doubting it.
The company cut another thousand jobs in July , primarily across finance, business affairs, and production divisions.
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