Warner Bros. Discovery is taking a hefty non-cash impairment charge, or write-down, of $9 billion at its networks division to align the book value of its linear television business with the reality of uncertain advertising and sports rights renewals as the NBA is set to move on.
The value of the linear assets when Discovery and Warner Media merged two and half year ago was significantly higher that it is now as consumers migrated and advertising dipped. That’s across the industry. A difference with David Zaslav-led WBD versus other big media companies is that it just lost a lucrative basketball package Amazon. WBD had matching rights and is suing the NBA to get the games back, but no one seems to think it can prevail. Zaslav had indicated early in the renewal process that the company didn’t absolutely need the NBA, but the lawsuit calls the loss a massive blow, which can’t make investors feel great.
“The goodwill impairment was triggered in response to the difference between market capitalization and book value, continued softness in the U.S. linear advertising market, and uncertainty related to affiliate and sports rights renewals, including the NBA,” the company said.
WBD also reported $2.1 billion of “pre-tax acquisition-related amortization of
intangibles, content fair value step-up, and restructuring expenses.”
It’s a complicated moment for WBD with the stock down about 70% from the merger and investors calling for action like breaking the company up again, which is immensely complicated. The company may be considering asset sales, including of its games business, according to the FT.
Zaslav and executives are hosting a call today at 4:30 ET.
The write-downs were the biggest news in the second quarter earnings report, which — on the plus side — saw a nice bump in streaming ad revenue and subscribers. They beat Wall Street expectations as Max rolled out its ad-light tier, and expanded in Latin America. The streamer ended June with 103+ million subs, adding 3.6 million. Streaming ad revenue surged by nearly 100%.
Studios faced tough comps from last year, not on the film slate but in games as 2023 was buoyed by a wildly popular Hogwarts Legacy. Theatrical revenue increased rose 19% (excluding foreign exchange) primarily due to higher home entertainment revenue from Dune: Part Two, and higher box office carryover from Godzilla x Kong: The New Empire, released at the end of March.
Studio profit fell 24%.
Total WBD revenue of $9.7 billion was down 6%.
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