Bruce Springsteen might sing about cable television today: “57 channels, and nothing is worth much.”
Cable television came into existence in the late 1940s, but was not widely introduced in the United States until 40 years later. This week, it took three days for it to be declared dead.
On Wednesday afternoon, Warner Bros. Discovery announced that it had reassessed the value of its cable networks. The result: The combination of WarnerMedia channels and Discovery, Inc. networks is worth $9.1 billion less than David Zaslav and Co. originally estimated. That’s a “billion” with the biggest “B” you’ve ever seen in your life.
Not to be outdone, just 24 hours later, Paramount Global announced that its Viacom cable channels had previously been overvalued (on the books) by $5.98 billion.
It was a whirlwind, and the devastation wasn’t even over yet. (“Twisters” in theaters now!)
Exactly 15 hours after TheAMC Networks announced its own goodwill impairment charge. At just $97 million, it was much, much smaller (AMC Networks is a much, much smaller company than WBD and Paramount), but as the saying goes, three is a trend.
What’s going on here? Well, WBD’s scrutiny was prompted by its surprise (and potentially devastating) loss of NBA rights. Warner Bros. Sports will lose the NBA on TNT after next season after the league struck a new, 11-year, $76 billion deal with Disney, NBCUniversal and Amazon. WBD is suing the NBA to keep its gaming package, but the damage — at least to its bottom lines — is done.
Paramount didn’t revise its calculations just because Warner Bros. Discovery did. This revaluation is a result of the impending Skydance deal. Basically, Paramount thought its cable channels were worth a lot; David Ellison offered little. Shari Redstone took the deal and Paramount has to revise its books.
A change in the stock price was enough to trigger AMC’s adjustment. About a year after the COVID-19 pandemic first shut down America, AMC shares (AMCX on NASDAQ) rose to over $70. In June 2024, they fell to about $10. Time to break out the calculators.
You think that’s bad? Shares of Warner Bros. Discovery (WBD on the NASDAQ) fell below $7 per share. The damn company is not even two years old and has already lost more than 70 percent of its value.
Paramount’s flagging stock (PARA on NASDAQ) has actually survived this week’s bombshell. How? Layoffs, layoffs, layoffs. We wrote that word three times because the company is laying off a huge number of employees: around 2,000 in the U.S., a person familiar with the situation told IndieWire. This is certainly not the first round of layoffs; in February, around 800 employees were laid off. And from December 31, 2022 to December 31, 2023, Paramount Global has cut around 2,600 employees.
The only area where Paramount appears to be expanding its staff is in the CEO area: Brian Robbins, Chris McCarthy and George Cheeks (“The CEO’s Office”) collectively replaced one man, Bob Bakish, in April. That joke will soon be out of the question, as the trio will likely be fired (or at least demoted) so Ellison can (probably) put former NBCUniversal CEO Jeff Shell in the top job at Paramount Skydance.
Together, WBD, Paramount and AMC own about 30 cable networks, according to our calculations. (OK, it is rough Mathematics.) And today they are all worth much less than they were on Tuesday. That doesn’t mean they are actually worthless.
Take Paramount. Its TV media business, which includes the CBS television network, generated revenue of around $14.5 billion in the first half of 2024. That’s $5 billion more than streaming and almost five times as much as the film business brought in in the same six months.
Warner Bros. Discovery’s TV networks generate as much revenue as the streaming and studio segments combined. AMC is essentially just cable channels plus a studio and a few niche streamers. The cable business brings in the money that fuels the flagging streaming business (and, in a bad year, the film business).
Even more impressive are the profit margins of cable television. Cable television provides the cash flow that directly offsets losses elsewhere. For Paramount, streaming brought in a surprise profit of $26 million, while the film sector lost about twice that amount. The television networks made a profit of $1 billion.
Last quarter, WBD’s studios earned about $210 million. The streaming division lost $107 million. The TV networks made $2 billion in profit — without a broadcast network of their own. That’s great until you remember that that pot is shrinking at a rate that streaming simply can’t make up for. Warner Bros. Discovery still has $40 billion in debt since its founding; today, its market cap (the total value of its stock) is just $17 billion.
Cable has already lost so much ground – and so many viewers – to streaming. Culturally, the shows on basic cable have virtually no meaning anymore, and these self-depreciations are rapidly driving down the value of media companies in a tough economy. Balance sheets are much less balanced right now (cash flow is not affected by these depreciations) and no one (except the tech companies: Netflix, Amazon, Apple) is safe.
Disney, NBCUniversal, and Fox executives made it through their respective quarters from April to June 2024 without any triggering events. Let’s hope this story isn’t too triggering for them.
