Warner Bros. Discovery reported its second-quarter results on Wednesday, including a non-cash impairment or write-down of $9.1 billion for its linear TV networks division. The company also incurred additional merger costs of $2.1 billion, which added $11.2 billion to its balance sheet.
The company’s linear TV networks include Food Network, HGTV, Discovery, CNN, TNT, TBS, Cartoon Network and Adult Swim.
The impairment of goodwill was made in response to the difference between market capitalization and carrying value, the uncertainty in the linear advertising market in the USA and the renewal of partnership and sports rights related to the NBA.
In streaming, the company saw slight gains with 103.3 million global subscribers for HBO, Max and Discovery+, including 3.6 million additional subscribers in the quarter. Warner Bros. Discovery attributed some of the growth to the global relaunch of Max.
In particular, domestic streaming subscribers saw a slight decline from the first quarter to 52.4 million from 52.7 million, while international subscribers increased from 46.9 million to 50.8 million. Streaming advertising revenue rose to $240 million, up 99% from $121 million in the same period last year.
Despite the difficulties of its linear TV networks, CEO David Zaslav instead pointed to the modest growth in streaming TV and ad sales.
“Ad sales in the second quarter had the best streaming quarter to date, driven in part by higher engagement, an increase in ad-lite subscribers and early international traction,” Zaslav said during the conference call. “This contributed to a significant sequential reduction in the company’s overall advertising declines to 3% from 7% in the first quarter.”
“While trends in our advertising business continue to reflect the bifurcation of the broader advertising market, we continue to be encouraged by the healthy momentum and growing scale we are seeing in streaming.”
This is the first earnings report since WBD lost its key NBA media rights, which led to WBD filing a lawsuit against the NBA for allegedly “unjustifiably rejecting” the league’s matching rights proposal.
When asked about the NBA’s media rights during the quarterly earnings call, the company did not provide much further information other than to say that the dispute is currently a legal one and has been turned over to lawyers. However, the company said it was “confident” about its position.
