CNN worthless? Parent company to write down $9.1 billion for traditional TV networks

After the U.S. stock market closed this Wednesday, Warner Bros. Discovery, a media and entertainment giant, released a disappointing second-quarter financial report. The quarterly performance fell below expectations, with all categories of the income statement sharply declining. Operating revenue decreased by 6.2% year-on-year to $9.71 billion, and the net loss approached nearly $10 billion, more than eight times the loss from a year ago. The most surprising and stock price-damaging aspect of the financial report is that Warner Bros. Discovery significantly devalued traditional television networks like CNN and TNT by $9.1 billion. In 2022, Discovery acquired WarnerMedia from AT&T for over $40 billion, leading to the creation of Warner Bros. Discovery, with these television networks being part of the assets acquired from WarnerMedia. Analysts pointed out that the substantial devaluation confirms that the value of traditional cable TV channels like CNN and TNT is now much lower than their value at the time of the $42 billion Warner Bros. Discovery merger in 2022. The revenue decline in the network division of Warner Bros. Discovery, including CNN, is not expected to stop in quarters like the second quarter. Warner Bros. Discovery has laid off over 2,000 employees in the past year, and CNN laid off another 100 employees last month. In fact, judging from the large-scale layoffs currently happening at CNN, it can be said that CNN's value is now negative and will remain so until it stops hemorrhaging cash. Warner Bros. Discovery CEO David Zaslav stated during the post-market earnings call on Wednesday: "Two years ago, the market valuation and current situation of traditional media companies are completely different from today. This impairment recognizes this fact and aligns our book value with future prospects." Media reports indicate that the $9.1 billion non-cash impairment in the second quarter was due to the severe impact on cable TV networks like CNN, TNT, and TBS under Warner Bros. Discovery from user cancellations, declining viewership, and a weak advertising market. Streaming platforms like Netflix have taken away audiences and subscribers from traditional TV networks. Another blow to these cable TV businesses recently was TNT's failure to reach a new agreement with the NBA, losing the broadcasting rights for the upcoming season of the U.S. professional basketball league. Last month, the NBA terminated its partnership with Warner Bros. Discovery, awarding a $76 billion 11-year media rights agreement to Disney, Comcast, and Amazon. Warner Bros. filed a lawsuit against the NBA last month, accusing it of breach of contract. Furthermore, it is argued that the impairment reflects the continuous shift of audiences from cable TV networks like CNN to streaming platforms, taking away the majority of traditional TV revenue from advertising sales and subscriptions. These changes have impacted the entire media industry. Disney's third-quarter financial results released this Wednesday once again confirmed this trend. Disney's financial report showed declines in cable TV advertising sales and subscription numbers, leading to a more than 4% drop in Disney's stock price on Wednesday, hitting a ten-year low After announcing its financial report, Warner Bros. Discovery fell nearly 10% in after-hours trading on Wednesday, and continued to plummet on Thursday, dropping to as low as $6.73 in early trading, hitting a new intraday low since the stock began trading in April 2022 after the merger, with a 12.7% decline during the day. Over the past two years, the company's stock price has fallen by more than 70%.