Warner Bros. Discovery is taking a write-down of $9.1 billion on its own book value to reflect the diminishing value of its television channels, including the former Turner properties of TNT, CNN, Cartoon Network and TBS.
WBD reported the write-down, also known as a noncash goodwill impairment charge, from its networks segment in its second quarter earnings released late Wednesday. WBD’s total revenues in the second quarter were $9.7 billion, which was 5% lower compared to the prior year quarter.
A goodwill impairment often occurs if assets acquired in a deal do not generate the financial results that were expected of them at the time of purchase. WBD said in its earnings release that the market value of the networks division was lower than its book value. This was due to ongoing challenges in the U.S. advertising market and uncertainty about renewing important contracts, like those with the NBA.
“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, and this impairment acknowledges this and better aligns our carrying values with our future outlook,” CEO David Zaslav said during an earnings call Wednesday.
WarnerMedia, then owned by AT&T, and Discovery merged to form WBD in 2022. The $43 billion deal brought together the Warner Bros. movie studio, HBO, CNN and the other former Turner networks, with channels including Discovery, Food Network and TLC.
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Credit: TNS
TNT, TBS, CNN, Cartoon Network and other former Turner channels maintain a major presence in Atlanta where they were founded by Ted Turner.
The merger generated significant debt, reaching $50 billion in the fourth quarter of 2022. In the second quarter of 2024, WBD ended with $41.4 billion of gross debt, having paid down $1.8 billion in April to June period, according to the release.
The huge goodwill write-off comes amid a period of disruption for cable television. Viewership and advertising dollars are continuing to decline as more consumers “cut the cord,” or cancel their subscriptions in favor of internet-based streaming services.
“We recognized early on this was a generational disruption impacting our industry, requiring us to take bold necessary steps and to pursue opportunities we see across the media landscape to best position Warner Bros. Discovery for the future,” Zaslav said during the earnings call.
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Credit: TNS
WBD has its own streaming products and is trying to boost its subscriber base while fighting churn. CNN, meanwhile, is trying to reinvent itself for a digital-first future, including by launching ad-supported streaming products and a planned subscription-based digital product. Earlier this summer, CNN announced the elimination of 100 jobs as the company reorients itself to “find a clear pathway to migrate the TV experience into the digital future.”
The company has had some victories, notably a ratings bonanza for CNN during the June 27 presidential debate between former President Donald Trump and President Joe Biden, which was broadcast from the company’s Techwood campus. Biden’s halting performance during the debate and doubts within the Democratic Party about his ability to compete with Trump ultimately led Biden to bow out of the race. The debate was the highest rated linear program in the history of CNN, according to WBD’s earnings release.
But last month, WBD lost out on an important contract for one of its networks: renewing its media rights deal with the NBA after 35 years. Disney, which owns ESPN, along with Amazon and NBCUniversal were awarded packages. WBD and TNT subsequently filed suit against the NBA, alleging breach of contract.
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Credit: TNS
Overall, WBD said its loss for the quarter was $10 billion, compared to $1.2 billion in the second quarter last year. Not counting the goodwill charge and another one-time expense, WBD said its adjusted net income was $1.8 billion for the quarter, down about 15% on a currency neutral basis.
Total revenue was $9.7 billion, down about 5% on a currency neutral basis.
Revenue from its networks decreased 8% between the second quarter of this year and last. TV revenue declined 27%, and theatrical revenue increased 19%, which was driven by home entertainment revenue from “Dune: Part Two” and higher box office carryover due to “Godzilla x Kong: The New Empire.”
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