Warner Bros. Discovery reported a decline in total revenue in its fiscal second quarter, dropping 6% year-over-year to $9.71 billion. In the three months ended June 30, 2024, the media company also reported an adjusted EBITDA of $1.8 billion, which is representative of a 16% decline from this time last year. Free cash flow equates to $976 million, a 43% year-over-year drop, while holding $41.4 billion of gross debt with 4.0x net leverage.
The company considers its global direct-to-consumer business as its top priority and obtained 3.6 million net additions for the quarter, bringing its total DTC subscriber count to 103.3 million. Yet it posted a $107 million loss in the DTC segment, a $104 million increase in losses compared to the previous year. Direct-to-consumer revenue declined by 6% on the year to finish at $2.57 billion.
Within its most recent earnings report, Warner Bros. Discovery divulged a $9.99 billion net loss, including a $9.1 billion non-cash goodwill impairment charge from its Networks segment regarding the devaluation of its television networks. Furthermore, there is $2.1 billion of pre-tax acquisition-related amortization of intangibles, content fair value step-up and restructuring expenses therein. The rationale for enacting the goodwill impairment came due to the difference between the company’s market capitalization and book value, along with diminished linear advertising and “uncertainty related to affiliate and sports rights renewals, including the NBA.”
Network revenues decreased 9% year-over-year to $2.68 billion on the quarter, while adjusted EBITDA fell by 8% to just under $2 billion. TNT broadcast the NBA Playoffs and Stanley Cup Playoffs, while TBS was the home of Tuesday night MLB games during the quarter. The company also introduced a new programming lineup for truTV including dedicated sports programs, which it will expand in the fall.
In an attempt to retain live game broadcasting rights to the National Basketball Association, Warner Bros. Discovery attempted to exercise its matching rights provision to compel the league to grant it a package of games that had been allocated to Amazon. The match of Amazon’s offer, which was reported to be worth $1.8 billion annually over 11 years, was denied by the league, which asserted that the company did not match the terms of the Amazon offer.
One of these points of contention pertained to whether Warner Bros. Discovery could legally match a package that is exclusive to a streaming platform. Moreover, Amazon reportedly put its first three years of payments in escrow, whereas Warner Bros. Discovery is said to have offered a letter of credit. Upon that denial, the league announced new 11-year media rights deals with The Walt Disney Company (ESPN/ABC), NBCUniversal (NBC/Peacock) and Amazon’s Prime Video collectively worth a reported $77 billion set to begin in the 2025-26 season.
Warner Bros. Discovery and the Turner Broadcasting System filed a lawsuit against the NBA, to which the league now has until Aug. 23 to file answering papers, seeking remedy either in the form of injunctive or equitable relief or monetary damages. No matter what happens, Charles Barkley will be remaining with the network, agreeing to a reaffirmation of a long-term commitment with Warner Bros. Discovery on Tuesday. Barkley is currently signed to a 10-year contract worth $210 million, he revealed during media appearances last week.
Earlier in the summer, he had revealed that he was retiring from television no matter what happened and would not be speaking on the NBA media rights negotiations any further. Next year is currently slated to be the last season of Inside the NBA featuring Barkley and his colleagues Ernie Johnson, Shaquille O’Neal and Kenny “The Jet” Smith in its current iteration. A report from The Wall Street Journal indicated that the network could look to retain the show as a sports variety program.
Warner Bros. Discovery has picked up sports rights to a variety of different leagues and events over the last several months, including the French Open, Big East Conference and Mountain West Conference. The media conglomerate also entered into a deal to sublicense select College Football Playoff games from The Walt Disney Company-owned ESPN. Warner Bros. Discovery, along with The Walt Disney Company and FOX Corporation, are aiming to launch Venu Sports, a direct-to-consumer joint streaming venture, in the fall. FuboTV, which reported its quarterly earnings on Tuesday, filed a lawsuit against the three companies and participated in the first day of a hearing as well, alleging that the proposed product would restrict competition.
