NEW YORK—The ongoing saga of how quickly traditional media companies can transition to streaming, took on new urgency with the release of Warner Bros. Discovery Q3 earnings on August 7. That report, which sent WBD stock down by as much as 12% in early August 8 trading, included healthy increases in streaming subs while reporting a whopping $9.1 write down in the value of its cable networks, which have been struggling with the impact of cord cutting and declining pay TV revenue.
More specifically, WBD took a $"9.1 billion non-cash goodwill impairment charge from the networks segment, as well as $2.1 billion of pre-tax acquisition-related amortization of intangibles, content fair value step-up, and restructuring expenses."
WBD stated that the “goodwill impairment 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.”
Illustrating those problems, advertising revenue in its network segment dropped by 10% YoY to $2.214 billion in Q3 2024 compared to Q3 2023 and total revenue in its network segment fell by 10% YoY to $5.274 billion in Q3 2024.
In the report, WBD also missed analyst expectations on revenue and profits, with revenues down 5% to $9.7 billion in the quarter and losses soaring to $10 billion with the write offs.
Meanwhile the company reported global direct-to-consumer (DTC) subscribers hit 103.3 million at the end of Q2, an increase of 3.6 million subscribers vs. Q1. Global DTC and that ARPU was $8.00, a 4% ex-FX increase vs. the prior year quarter.
While global streaming subs increased, domestic subscribers in U.S. and Canada declined from 52.7 million in Q1, 2024 to 52.4 million in Q2 2024.
In addition, DTC revenue declined, a worrying trend for a company hoping to replace lost pay TV revenue with streaming. DTC revenues decreased 5% to $2.568 billion in Q2 2024 compared to a year earlier in Q2 2023.
In addition, the DTC segment saw its adjusted EBITDA losses rise to $107 million, a $104 million increase in losses vs. the prior year.
