Warner Bros. Discovery writes down worth of TV belongings by $9B
Warner Bros. Discovery mentioned Wednesday it wrote down the worth of its TV belongings because of the uncertainty of charges from cable and satellite tv for pc distributors and sports activities rights renewals, sending its shares down almost 10% in prolonged buying and selling.
The movie and leisure studio, which owns sports activities community TNT and streaming service Max, recorded a $9.1 billion non-cash goodwill cost within the second quarter. This cost, stemming from a reassessment of the belongings’ worth because the merger of WarnerMedia and Discovery, contributed to a $10 billion internet loss for the quarter.
The media panorama has considerably modified prior to now two years, impacting valuations and expectations for conventional media firms and this present state of affairs is mirrored within the write down, CEO David Zaslav mentioned in a name with analysts.
Requested whether or not the corporate was contemplating hiving off belongings, CFO Gunnar Wiedenfels mentioned on the decision: “We’ve mentioned earlier than, you shouldn’t be stunned to see us participating in , no matter M&A processes are occurring on the market.”
The shift of viewers from conventional tv to streaming companies has led to a decline in promoting income and affiliate charges, impacting the profitability of Warner Bros. Discovery’s tv belongings. This decline is additional compounded by the escalating prices of buying sports activities rights.
TNT did not renew a broadcast take care of Nationwide Basketball Affiliation video games, at a time when dwell sports activities have turn into essential for firms to extend viewership. The corporate sued the NBA final month.
Dropping the lawsuit would speed up the decline of its TV enterprise, analysts mentioned.
“The massive impairment cost from Warner Bros Discovery is actually the ultimate nail within the coffin of the standard linear TV enterprise,” mentioned Bob O’Donnell, chief analyst at TECHnalysis Analysis.
Content material income in Warner Bros Discovery’s studio phase fell 6%, as the sport “Suicide Squad: Kill the Justice League,” launched earlier this yr underperformed, in comparison with final yr’s high sport “Hogwarts Legacy.”
Director George Miller’s much-awaited “Furiosa: A Mad Max Saga” underperformed on the field workplace following its launch in Might. The movie raked in $67.5 million on the home field workplace, IMDb’s Field Workplace Mojo information confirmed, whereas it had a reported a price range of $168 million, in keeping with analysts at TD Cowen.
The studio’s inventory has shed a 3rd of its worth this yr.
Not sufficient
Nonetheless, the corporate’s direct-to-consumer buyer base grew due to its cheaper ad-supported choices and growth of the Max streaming service to new markets.
World direct-to-consumer prospects on the finish of the quarter was 103.3 million, up from 99.6 million subscribers within the January-March interval, and beating analysts’ estimates of 101.6 million, in keeping with Seen Alpha information.
Income from ads on its direct-to-consumer platforms almost doubled to $240 million, trouncing Wall Road expectations, because of increased engagement on the Max streaming platform and robust subscriber progress, the corporate mentioned.
The corporate’s rival Walt Disney mentioned on Wednesday that its Leisure unit, together with its streaming companies Disney+, Hulu and ESPN+, recorded its first revenue within the April-June quarter.
“Robust streaming subscriber progress is just not sufficient to make up for weakening fundamentals, the lack of NBA broadcast rights, promoting weak spot, and misses throughout free money circulate, income, EBITDA, and earnings,” mentioned Michael Ashley Schulman, chief funding officer of Working Level Capital.
Excluding one time objects such because the goodwill cost, the corporate’s loss was 36 cents per share, wider than estimates of twenty-two cents per share, in keeping with LSEG information.
The media big reported income of $9.71 billion within the second quarter on Wednesday, in comparison with analysts’ estimate of $10.07 billion.
