Warner Bros. Discovery (WBD) reported a massive $9 billion write-down on its linear cable TV networks for the second quarter of 2024, a move that underscores the company’s weakening financial prospects. The write-down reflects a confluence of challenges facing the traditional television industry, including declining advertising revenue, shrinking subscriber bases, and uncertainty surrounding sports rights renewals.
"The (write-down) was triggered in response to the difference between market capitalization and book value, continued softness in the U.S. linear advertising market, and uncertainty related to affiliate and sports rights renewals, including the NBA," stated WBD in a summary of its second-quarter financials for investors.
The company's total TV revenue decreased by 17% to $4.3 billion during the quarter, largely driven by fluctuations in licensing revenues. Advertising revenue also declined by 11%, mirroring a broader downward trend in linear advertising. Affiliate and subscription revenue fell by 5%, attributable to subscriber losses and the absence of pay-per-view boxing events, partially offset by price increases.
Licensing and other revenue experienced a steep drop of 48%, impacted by fewer program availabilities, including the final season of "Jack Ryan" in 2023, and lower licensing activity in the secondary market. Despite these setbacks, WBD managed to grow its direct-to-consumer business by 3.6 million subscribers, though the segment reported a $107 million loss for the quarter after recording a $86 million profit in Q1 2024.
WBD’s linear TV networks are facing an increasingly uncertain future as cable subscriptions decline and the shift to streaming continues. While the company implemented cost-cutting measures, saving $500 million during the quarter, the write-down highlights the ongoing challenges of adapting to a rapidly changing media landscape.
“We are taking decisive actions to address the changing media landscape, including investing in our streaming platforms, maximizing the value of our content library, and implementing cost efficiencies,” said David Zaslav, CEO of WBD. "We are confident in our ability to navigate these challenges and deliver long-term value for our shareholders."