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Warner Bros. Discovery Inc.’s (NASDAQ:WBD) colossal $9.1 billion writedown of CNN, HBO, TNT and other TV networks during the second quarter is simply a sign of the times, the company’s CFO says.
What Happened: Consumers continue to abandon traditional TV for online streaming services, and Warner Bros. chief financial officer Gunnar Weidenfels said “it is what it is.”
“Am I disappointed about the impairment? Yes. Am I disappointed that the trends in the linear business haven’t been a little better?” Weidenfels told analysts on a Thursday earnings call. “You know, there’s been talk about recovery a year, year and a half ago. It hasn’t really happened. It is what it is. We’re managing this as best we can.”
Weidenfels blamed the writedown on a “number of triggering events,” including continued softness in the U.S. ad market and uncertainty related to affiliate and sports rights renewals. Recall how Warner Bros. failed to win the rights to air National Basketball Association games — something it had for decades.
“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,” he said during the call.
“And the goodwill impairment at the end of the day is the accounting reflection of that state of the industry and our strategy.”
Read Also: Warner Bros Discovery Shares Are Surging Thursday As CEO Considers Asset Sales, Spinoff
Why It Matters: Warner Bros. Discovery posted a net loss of $10 billion for the second quarter, up from a net loss of $1.22 billion during the same period last year.
CEO David Zaslav said the impairment acknowledges that the market for legacy media companies has changed considerably in the just the past two years.
“This impairment acknowledges this and better aligns our carrying values with our future outlook,” he said during the call.
Warner Bros. Discovery’s Direct-To-Consumer segment, which offers streaming services HBO, Max and Discovery+, saw the number of subscribers increase by 3.6 million from the first quarter to 103.3 million during the second quarter.
It also posted a 99% jump in second-quarter year-over-year advertising revenue, primarily due to higher viewer engagement with its U.S. Max offering.
Price Action: Warner Brother Discovery dropped 8.95% to close at $7.02 on Thursday.
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Posted In: WBD
