CNN parent Warner Bros Discovery takes $12 billion write-down on cable TV networks
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Warner Bros Discovery CEO David Zaslav said the write-down was an acknowledgment of the headwinds faced by legacy media companies.
PHOTO: NYTIMES
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NEW YORK – Warner Bros Discovery (WBD), the parent company of CNN, HBO and TNT, said on Aug 7 that it was writing down the value of its TV networks by US$9.1 billion ($12.1 billion), the latest sign of the continued free fall of traditional cable.
Mr David Zaslav, the company’s chief executive, said on an earnings call that the write-down was an acknowledgment of the headwinds faced by legacy media companies.
“It’s fair to say that even two years ago, market valuations and prevailing conditions for legacy media companies were quite different than they are today,” Mr Zaslav said.
“This impairment acknowledges this and better aligns our carrying values with our future outlook.”
Write-downs are common when a public company needs to alert investors that a piece of its business has depreciated significantly in value. It can be a leading indicator of further trouble, such as when Disney wrote down its stake in ailing publisher Vice in 2019, or merely an acknowledgment of what investors already know.
Like many traditional media companies, WBD is trying to replace the profits from its declining cable businesses, including CNN, with cash from its nascent streaming businesses.
The company’s streaming service, Max, added 3.6 million subscribers in the most recent quarter, Mr Zaslav said, beating investor expectations and the company is increasing its ad revenue from Max.
By and large, investors are not betting that streaming profits will supplant the earnings from cable. The share prices of TV companies such as WBD and Paramount have continued to slide precipitously, despite growing revenue from streaming services.
WBD’s stock closed at US$7.71 a share on Aug 7, down 68 per cent since it debuted in April 2022; it fell another 8 per cent after the markets closed following the company’s earnings announcement.
As its stock has tumbled, some spectators have urged the company to take drastic action to turn its fortunes around.
Ms Jessica Reif Ehrlich, an analyst for Bank of America’s research division, said in a recent note that WBD should consider options, including a break-up of the company or a sale of certain assets.
“All options need to be on the table,” the note said.
WBD faced a setback in recent weeks with its failed bid for rights to air National Basketball Association (NBA) games, which have been a linchpin for its sports division for decades. NBCUniversal, a traditional media rival owned by Comcast, made a knockout bid for a major NBA contract that made pursuing a comparable TV package uneconomical.
WBD is now embroiled in a high-stakes lawsuit with the NBA – long a cherished business partner – over whether it has the rights to match Amazon’s bid for another package of games. NYTIMES
