Scanning a list of
basic cable channels is like rummaging through an attic.
What is that musty aroma? MTV, VH-1, TV Land, USA Network, E!, TBS?
It seems so. But when does it come time to clean out the attic? Maybe soon?
Two headlines from last week tell the story. One was bannered at the
top of Page One of the second section of last Thursday’s Wall Street Journal, the “Business & Finance” section: “Warner Posts Loss of $10 Billion.”
The other was a story on the front page of the WSJ on the same day: “Disney Records Its First Streaming Profit.”
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Warner Bros. Discovery and Walt Disney Co. swim in the same pool. But WBD is invested in major media’s
biggest assemblage of basic cable properties, while Disney’s basic cable assets are comparatively few for a company its size.
Or to put it more simply,
Disney’s adjustment to streaming-first is paying off. WBD’s ownership of basic cable channels -- 16 by the TV Blog’s count, and the most among the media majors -- is not.
By WBD’s own acknowledgement, the value of its basic cable assets is in a “generational” freefall.
In its 2024 Q2 earnings call last Wednesday, the company announced it had taken a non-cash impairment in the quarter of $9 billion reflecting the decline of the value of
its basic cable assets.
“This quarter we recorded a non-cash impairment of the goodwill attributed to our linear networks,” said David Zaslav,
WBD president and CEO.
“It’s fair to say that even two years ago [2022, the year the WBD Discovery merger was completed] market valuations and
prevailing conditions for legacy media companies were quite different than they are today, and this acknowledges this,” he said. “We recognized early on this was a generational disruption
impacting our industry.”
The factors behind the impairment are familiar to anyone who has followed the TV business.
“In the second quarter, a number of triggering events, including the difference between our current market
cap and the book value of the company, the continued softness in the U.S. ad market, and uncertainty related to affiliate and sports rights renewals required us to adjust our planning assumptions and
take a $9 billion non-cash impairment charge against the carrying values in the network segment,” said WBD CFO Gunnar Wiedenfels.
Once, the basic cable
channels cited above and so many others were in the vanguard of a new kind of TV that expanded the choices available to average households tenfold and presented a threat to the old broadcast
networks.
The networks survived, and despite the headwinds the legacy networks face today, basic cable is in worse straits.
Some time ago, the TV companies -- always in search of new jargon -- began positioning their broadcast and cable assets (today known as platforms) as “brands.”
But how valuable are these “brand” names? One example is WBD’s TNT, which has lost its long-time association with the NBA, and hence its proportionate
value. Without the NBA, what does the TNT brand stand for at all?
In recognizing this “generational” change, WBD
is also acknowledging its belief that the world of ad-supported, linear basic cable is not likely to mount a comeback anytime soon and probably not ever.
And if WBD
is doing it, the other majors whose portfolios are heavy with legacy basic cable channels -- most notably NBCU and Paramount -- are in the same boat.
We all
love Snooki, but how many times can MTV go back to the Jersey Shore (photo above)?
Above photo: Nicole Polizzi (Snooki), left, and Deena Buckner on
“Jersey Shore Family Vacation” on MTV. Photo courtesy of Paramount/MTV.