Warner Bros Discovery Under Siege

The promise of Warner Bros. Discovery Inc. (NASDAQ: WBD) is that it would be a huge collection of media assets run by David Zaslav. The new company combines the media assets of AT&T and those of Discovery. Instead, the marriage has been a huge disappointment. Warner Bros. Discovery’s stock has collapsed, and there is a worry that the promise has passed.

Warner Bros. Discovery said in a filing with the U.S. Securities and Exchange Commission that it could have write-downs of as much as $4.3 billion. According to The Wall Street Journal, $2.0 billion to $2.5 billion will be “writing down the value of some content and killing off projects that were in development.” Zaslav has found that the deal is not as clean and easy as he expected. His reputation is on the line.

Zaslav’s other problem is that Warner Bros. Discovery has a debt load of over $50 billion. Cuts may bring down expenses, but revenue will still need to jump quickly and at an accelerated pace.

Warner Bros. Discovery’s stock trades at $13, very near its 52-week low. The 52-week high is $31.55. So far this year, the shares have dropped 44%. Even battered Disney’s stock has not fallen that much. Nor have the shares of Paramount, a company often viewed as too small to compete against media giants.

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Warner Bros. Discovery must contend with a problem that cuts across the entire industry. Advertising rates have been and will be pressured by a slowing economy. This could dent demand for movies, both those released in theaters and those released on streaming services. And the larger streaming services, led by Netflix and Amazon, will continue to do what they can to protect their market share.

Warner Bros. Discovery is in its earliest stages as a new public company. It has fallen far enough behind some rivals, at least in the eyes of Wall Street, that Zaslav may never catch up.

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