Warner Bros. Discovery’s losing streak continued in its latest quarter, with the company taking a $9 billion writedown to reflect the decline of its long-suffering television channels.
The media company led by David Zaslav reported disappointing second-quarter results on Wednesday, sending its shares down 10% after closing hours on Wall Street. The company continues to fight with rate cuts to regain control of its $38 billion debt, a legacy of its 2022 purchase of AT&T’s largest WarnerMedia.
Wednesday’s earnings report, along with the large write-down, highlighted the immediate drop in the cable TV business as viewership and advertisers shifted to streaming. Wall Street’s receipt of its quarterly effects is the latest setback for the company, which is grappling with the expected loss of its NBA contract for its cable channel TNT after next season.
The New York-based company generated profits of $9. 7 billion, down 6% from the same quarter a year earlier.
Adjusted earnings before interest, taxes, depreciation and amortization fell 16% to nearly $1.8 billion compared to $2.1 billion in the year-earlier period. Last year, the company spent less on programming because of the Writers Guild of America strike. The company also introduced a popular Harry Potter video game, “Hogwarts Legacy” last year, while this year’s “Suicide Squad” game missed its mark.
But the immediate result was the company’s staggering $10 billion net loss, which it said included the $9. 1 billion impairment rate of its television networks department as well as $2. 1 billion. of “amortization of intangible assets and acquisition-related restructuring expenses. “
Warner Bros. Discovery executives told analysts that after a rigorous review, they concluded that the company’s networks were worth $9 billion less than they were just two years ago. The company owns some of the best-known classic channels in the industry, including CNN, TNT, HGTV, Food Network, Animal Planet and TLC.
The loss of TNT’s contract with the NBA prompted the company to conduct a review of its assets, Chief Financial Officer Gunnar Wiedenfels said.
“No single thing causes this deterioration,” Wiedenfels said. “It’s quite a reassessment. “
The company attributed continued weak advertising profits to its linear television business. He also highlighted “the uncertainty related to the renewals of the NBA’s associational and sports rights. ”
These gains come less than two weeks after Warner Bros. Discovery filed a breach of contract lawsuit against the NBA, seeking a judgment to prevent the league from awarding a television contract to Amazon Prime Video.
The lawsuit, filed July 26 in New York State Supreme Court, alleges that the NBA violated Turner Broadcasting’s existing agreement by allegedly refusing to honor the cable programmer’s rights to accommodate an offer from Amazon for the contract era beginning with the 2025-2026 era. . season. In its complaint, the company highlighted the extent of the loss of the game it has been broadcasting since 1989.
“NBA broadcasting rights are an exclusive asset that must be replaced,” the company said in its lawsuit.
Warner Bros. Discovery failed to reach a deal with the NBA in its exclusive negotiating era earlier this spring. Last month, the league announced it had passed on Turner, while also closing deals with ESPN, NBCUniversal and Walt Disney Co. ‘s Amazon. The NBA is expected to respond to Turner’s lawsuit later this month.
The league said the lawsuit was baseless.
During the call with analysts, Zaslav declined to talk about the process, stating that the case is now in the hands of lawyers.
“If we judge the will, we will leave,” said Zaslav.
But the expected loss of the NBA contract has investors and analysts concerned that Warner Bros. Discovery doesn’t have the programming clout it wants to compete in the media landscape with its better-resourced rivals.
Jessica Reif Ehrlich, an analyst at Bank of America, asked a direct question: Warner Bros. other sports rights and the growth of streaming. Discovery would be enough to compensate for the decline of the classic television sector.
“We have no doubt as a leadership team that the answer to that question is ‘yes,'” Wiedenfels said. “There are great opportunities for expansion in both the direct-to-consumer and studio sectors. Array… We have a plan in place to help this project. ”
But Wiedenfels added that he could not “perfectly predict” when the company’s turnaround efforts would take effect.
“There were messages of recovery (. . . ) but it didn’t happen,” he said. It is what it is and we approach it in the most productive way possible. “
Zaslav interrupted Wiedenfels to tell him that the company’s most sensible executives had a “plan of attack every week, with all the participants. “The quality of the upcoming programming provides the company with confidence that it will grow its streaming business and profits, he said. saying.
Global direct-to-consumer subscribers reached 103. 3 million at the end of the quarter, boosted by the second season of HBO’s “House of the Dragon. “The company said the ongoing launch of its Max streaming service in Europe was a success, with the offering now available in 65 countries and territories.
JB Perrette, head of global streaming and gaming at Warner Bros. Discovery, told analysts: “We are pleased with the content slate, which is obviously a driving force for us. »
The company said it paid off $1. 8 billion in debt in the second quarter. It ended the April-June era with $3. 6 billion in cash.
The company has reduced its workforce. It revealed about 1,000 additional task cuts late last month.
“The market situation in the classic sector is difficult,” Zaslav said. “But we are satisfied with our situation. . . The number one priority is to run this business as successfully as possible. “
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