Shares of Warner Bros. Discovery (WBD -2.87%) were plumbing new depths today after the entertainment giant posted another disappointing earnings report in its second quarter.
As a result, the stock was down 8.9% at 12:34 p.m. ET.
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Warner Bros. is still broken
Warner Bros. Discovery has been struggling since the business was formed through a merger in 2022. It is burdened with billions of debt and facing headwinds from the decline of linear media.
Those challenges were on display again in the second-quarter earnings report as revenue fell 6% to $9.71 billion, well below the consensus at $10.07 billion.
Revenue declined in all three of its business segments (studios, networks, and direct-to-consumer), and domestic Max subscribers fell by 300,000 from the first quarter, though it added 3.9 million new subscribers in international markets.
The company took a goodwill impairment charge of $9.1 billion on the value of its network business and a $2.1 billion amortization charge on intangibles. Challenges in the U.S. linear advertising market and uncertainty related to sports rights renewals, including the NBA, contributed to those charges.
On the bottom line, WBD reported a 15% decline in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to $1.8 billion. Excluding the impairments, WBD reported an operating loss of $813 million.
CEO David Zaslav noted "industry headwinds" and said the company was focused on growing subscriptions to Max. He expected profitability in the direct-to-consumer segment by the second half of next year.
Can Warner Bros. be saved?
The company didn't give detailed guidance but said it was still targeting $1 billion in EBITDA from the direct-to-consumer segment.
That alone won't save the company, however, and we're likely to see more asset impairments as the traditional cable business shrinks, especially after TNT's loss of the NBA.
Warner Bros. Discovery has probably the best collection of IP of any entertainment company outside of Disney, spanning everything from Looney Toons to the HBO catalog, but under David Zaslav, it's been more focused on cutting costs than building a business.
That strategy has clearly not paid off. While the stock might seem cheap for a business of its potential, it's best avoided until management takes a turn in a different direction.
