Warner Bros. Discovery Faces Major Write-Down Amid TV Troubles, NBA Dispute

Warner Bros. Discovery’s recent financial performance has been turbulent, highlighted by a significant $9-billion write-down reflecting the declining value of its television channels.

The media conglomerate, led by David Zaslav, reported underwhelming second-quarter earnings on Wednesday, causing its shares to plummet in after-hours trading on Wall Street. The company continues to navigate cost-cutting measures to manage its $38-billion debt, a remnant of its 2022 takeover of WarnerMedia from AT&T.

The New York-based company reported revenue of $9.7 billion, a 6% drop compared to the same quarter last year. Adjusted earnings before interest, taxes, depreciation, and amortization decreased by 16%, falling to nearly $1.8 billion from $2.1 billion in the previous year. The company noted that last year’s expenditure on programming was lower due to the Writers Guild of America strike.

The most striking figure, however, was the company’s colossal $10-billion net loss. This included a $9.1 billion impairment charge related to its TV networks division and an additional $2.1 billion attributed to “acquisition-related amortization of intangibles and restructuring expenses.”

Warner Bros. Discovery attributed its losses primarily to continued weaknesses in advertising revenue across its linear television business, which features networks such as CNN, TBS, HGTV, TLC, Animal Planet, and the Food Network. The company also cited “uncertainty related to affiliate and sports rights renewals, including the NBA” as contributing factors.

Adding to the company’s challenges, less than two weeks ago, Warner Bros. Discovery filed a breach of contract lawsuit against the NBA. They are seeking a judge’s intervention to stop the league from awarding a television contract to Amazon Prime Video. The lawsuit, filed on July 26 in New York Supreme Court, claims the NBA breached Turner Broadcasting’s current deal by allegedly not honoring the cable programmer’s rights to match an offer from Amazon for the period starting in the 2025-26 season. The NBA, which bypassed Turner, its broadcast partner since 1989, to make deals with Walt Disney Co.’s ESPN, NBCUniversal, and Amazon, is expected to respond to Turner’s lawsuit later this month.

On a slightly positive note, the company managed to repay $1.8 billion in debt during the second quarter. As of the end of June, it had $3.6 billion in cash reserves.

Additionally, global direct-to-consumer subscribers rose to 103.3 million by the end of the quarter. This growth was fueled in part by the second season of HBO’s popular series “House of the Dragon.” The company also reported a successful rollout of its streaming service Max in Europe, now available in 65 countries and territories.

Warner Bros. Discovery’s financial woes underscore the ongoing challenges the company faces as it seeks to streamline operations and reduce its substantial debt burden. While there are areas of growth, particularly in its direct-to-consumer segment, the significant write-down and legal battles with the NBA highlight a tumultuous period for the media giant.

Source: Warner Bros. Discovery