Warner Bros Discovery and Paramount wrote down the value of their television channels by a total of $15 billion in their respective results for the second quarter of 2024. It reflects the declining value of their television networks and provides them with an operating loss which is treated as a tax asset. They are counting on growing revenues from their new online services faster than they are falling from their legacy businesses.
Warner Bros Discovery reported a quarterly net loss of $10 billion, including a $9.1 billion write down of the value of its television networks, which include CNN, HBO, TNT Sports, and Discovery, among others.
The non-cash goodwill impairment charge was triggered by its declining share price, a weak television advertising market in the United States, and uncertainty related to affiliate and sports rights renewals, including NBA basketball. The remaining goodwill on the balance sheet is $25.74 billion.
Chief executive David Zaslav told analysts: “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.”
Chief financial officer Gunnar Wiedenfels said: “While I am certainly not dismissive of the magnitude of this impairment, I believe it’s equally important to recognize that the flip side of this reflects the value shift across business models, and our conviction and confidence in the growth and value opportunity across studios and our global direct-to-consumer business have never been stronger.”
Asked whether the company was considering selling off assets, he said: “You shouldn’t be surprised to see us engaging in you know, whatever M&A processes are going on out there.”
Quarterly revenue was $9.71 billion, with free cash flow of $0.97 billion, compared to revenues of $10.36 billion and free cash flow of $1.72 billion for the same quarter the previous year.
Global online video subscribers, including Discovery+, HBO, HBO Max, and Max, were 103.3 million, up by 3.6 million over the quarter, with 52.4 million of them in the United States and Canada. Quarterly revenue from the direct-to-consumer business was $2.57 billion, down from $2.73 billion.
The WBD share price is down by over 70% since the merger of Warner Bros and Discovery in April 2022. It has a market capitalisation of around $17.25 billion and debts of $37.8 billion. That puts the quarterly loss of $107 million on its direct-to-consumer business in perspective.
The write down in the value of television networks was echoed by Paramount Global, which includes CBS, MTV, and Nickelodeon, among many other channel brands.
Paramount reported a quarterly net loss of $5.96 billion, including a $5.98 billion write down of the value of its television networks. The remaining goodwill on its balance sheet is $10.51 billion.
The number of Paramount+ subscribers fell by 2.8 million to 68 million, reflecting the end of a bundling agreement with Tving in South Korea.
The direct-to-consumer business had quarterly revenue of $1.88 billion, nominally breaking even by $26 million on operating expenses. That was out of total quarterly revenue of $6.81 billion, down from $7.62 billion for the same quarter the previous year. The company expects Paramount+ to become profitable in the United States in 2025.
Not to worry. By then, Paramount is due to merge with Skydance Media to create an even bigger media giant.