Warner Bros. Discovery Inc. has reported a staggering $10 billion loss for the second quarter, largely due to a $9.1 billion noncash goodwill impairment charge. This massive charge reflects the company’s struggle with declining traditional TV viewership and uncertainty over sports rights, including the loss of National Basketball Association (NBA) games from its broadcast portfolio.
The loss resulted from a significant adjustment in the value of its TV networks segment amid “ongoing softness in the U.S. linear advertising market” and complications surrounding affiliate and sports rights renewals. The impact of the NBA’s new broadcasting deal, which excludes Warner’s TNT network starting in the 2025-26 season, has intensified these financial pressures.
Shares of Warner Bros. Discovery (WBD) plunged 11% in after-hours trading on Wednesday, bringing its year-to-date decline to 32.3%. The company’s financial woes come as it continues to grapple with the challenges facing traditional cable TV and anticipates future growth in its streaming ventures.
The NBA’s new deal has awarded broadcasting rights to Walt Disney Co.’s ABC and ESPN, Comcast Corp.’s NBCUniversal, and Amazon.com Inc.’s Prime Video, leaving Warner without a major sports programming anchor. In response, Warner has filed a lawsuit against the NBA, claiming that its bid to match Amazon’s offer was unjustly rejected.
Analysts are skeptical about Warner’s ability to recover from this setback. Jamie Lumley of Third Bridge noted that the loss of NBA rights represents a significant blow to Warner’s content lineup, which will be difficult to replace. The lawsuit with the NBA may also strain Warner’s relationships with other sports leagues and teams.
In its earnings report, Warner Bros. Discovery revealed a 5% decline in overall revenue to $9.7 billion, falling short of FactSet forecasts of $10.07 billion. The company posted a loss of $4.07 per share, significantly worse than the expected 27-cent per-share loss. Revenue decreased across its studios and networks segments, while its streaming business, despite growing its subscriber base, continued to incur losses.
“Last summer, Barbie brought back pink, but now Warner is seeing nothing but red,” remarked Lumley. “The combination of a massive write-down and declining revenues across major segments raises alarm bells for the media giant as it seeks a path forward.”
