By Bill Peters
‘Last summer Barbie brought back pink but now Warner is seeing nothing but red,’ analyst says
Warner Bros. Discovery Inc., the media giant that owns cable channels like CNN and TNT and the streaming platform Max, reported a $10 billion loss during the second quarter – a biproduct of a massive charge it booked as viewers retreat from traditional TV and the company deals with a potential future without Natioanl Basketball Association games.
The loss, the company said, included a $9.1 billion noncash goodwill impairment charge, as it reconciles the value of its TV networks segment amid “continued softness in the U.S. linear advertising market, and uncertainty related to affiliate and sports rights renewals, including the NBA.”
Warner Bros. Discovery shares (WBD) slid 8.6% after hours on Wednesday. The stock is down 32.3% so far this year, as cable TV struggles and investors look for the entertainment industry’s streaming ambitions to turn a profit.
The charge comes after the NBA last month announced a decade-plus, multibillion-dollar broadcasting deal for its games that didn’t include Warner, whose TNT network has long been a home of the league’s basketball games as well as the popular studio show “Inside the NBA.” Instead, starting with the 2025-26 season, NBA games will be broadcast by Walt Disney Co. (DIS) – which owns ABC and ESPN – NBCUniversal (CMCSA) and Amazon.com Inc.’s (AMZN) Prime Video.
In response, Warner, as an NBA rights holder, is suing the league, saying that it matched Amazon’s bid to broadcast games and that the NBA’s rejection of that matching offer was “unjustified.”
Some analysts have questioned how much Disney, Amazon and NBC could profit from NBA broadcasts. They’ve also observed that Warner’s lawsuit risks hurting relationships with other sports leagues and teams.
“It remains unclear where the dust will settle with Warner’s lawsuit with the NBA, but we’ve been hearing from our experts that there is little hope the company will be able to hold on to any NBA rights for the 2025-2026 season,” Third Bridge analyst Jamie Lumley said in emailed remarks.
“This creates a massive hole in Warner’s content offering that will be challenging to fill for a company that is strapped for cash,” Lumley continued.
Warner Bros. Discovery on Wednesday said that during the second quarter, revenue overall fell 5% year over year to $9.7 billion, below FactSet forecasts for $10.07 billion. The company lost $4.07 a share, far more than expectations for a per-share loss of 27 cents.
Sales fell in the company’s studios segment – the home of Warner Bros. and DC Studios – as well as in its networks segment. While the segment that includes its streaming business grew subscribers a bit, sales there fell and the segment was still losing money as measured by its preferred adjusted measure of profit.
“Last summer Barbie brought back pink but now Warner is seeing nothing but red,” Lumley said. “A massive writedown and declining revenues across all major segments have alarm bells ringing at the beleaguered media giant as Warner Bros. Discovery struggles to find a good path forward.”
-Bill Peters
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08-07-24 1759ET
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