Almost simultaneously, we learned of the extremely divergent paths taken by two of the biggest names in the content business today—perhaps the two biggest, along with Netflix. Warner Bros. Discovery has fallen by a spectacular 12.7% on the stock market. At the same time, Disney has announced $49 million in profits, ending its two-year cycle of continuous losses. Analyzing both scenarios can help us understand the audiovisual industry’s current situation.
Warner falls. According to Variety, the Warner Bros. Discovery fall is historical: The company has suffered a $9.1 billion write-down, not a cash loss but a non-cash charge for the difference between its market capitalization and the book value of the network segment. Much of this is due to the decline in the value of the pay-TV division, which is a large part of the company’s business. The drop came after the announcement of the company’s second-quarter financial results when it reached a value of $6.73 per share. The company’s stock has stabilized at around $7 per share.
A bad streak. Warner Bros. Discovery hasn’t had good financial news in a while. In mid-June, its shares were down to $6.99; a year ago, the stock was worth 40% more than it is now. That drop has wiped $1.6 billion off the company’s market value, which is now about $17.2 billion. Again, to understand how much the company’s value has plummeted, compare it to its market value in 2022, when Discovery acquired WarnerMedia: $50 billion. We’re talking about a net loss of $10 billion this quarter.
Some causes. Warner has discussed some possible causes for this devaluation. The second fiscal quarter profits were well below expectations. To add to this, there was also the announcement of the loss of the NBA broadcasting rights beginning in 2025 and the poor advertising results in the linear television part of the company. This part of the business includes channels such as the Food Network, HGTV, Discovery, CNN, TNT, TBS, and Cartoon Network/Adult Swim.
Several annos horribilis. David Zaslav, CEO of Warner Bros. Discovery, has promised measures to improve these results, which also have their silver lining. (HBO and Max have gained 3.6 million subscribers, bringing their total to 103.3 worldwide, which the company attributes to the global launch of Max and Discovery+). However, the company started to lean towards cuts in recent years. It all started with the cancelation of Batgirl, followed by unpopular decisions and austerity measures: more finished and canceled movies, continuous licensing of shows and movies to other platforms that no longer have an exclusive presence on Max, massive layoffs, and, most recently, the closure of the emblematic Cartoon Network website.
Disney, in the opposite direction. Meanwhile, the absolute success of Inside Out 2, the highest-grossing animated film of all time, is paying off for Disney (in addition to the more modest but notorious success of Kingdom of the Planet of the Apes), which has received a quarterly report with unprecedented profits. Disney+ has been out of the red for the first time since its creation, although it’s still in a difficult situation: Except for ESPN, none of its television platforms have shown exceptional results.
Disney numbers. Disney’s total revenue for the quarter rose 4% to $23.16 billion, with operating income jumping 19% to $4.23 billion. CEO Bob Iger said, “This was a strong quarter for Disney, driven by excellent results in our Entertainment segment both at the box office and in DTC, as we achieved profitability across our combined DTC streaming businesses for the first time.” The revenue outlook for the fiscal fourth quarter is also solid, as it will include the box office performance of Deadpool & Wolverine.
More subscribers. Inside Out 2’s success didn’t stop at the box office; a good portion of Disney+’s 1.3 million new subscribers in the quarter were undoubtedly viewers of the first film, which was seen 100 million times worldwide. The company’s outlook for the fourth quarter is good. Despite the already-announced fee increase, Disney expects an increase in subscriptions (undoubtedly spurred by the upcoming release of Inside Out 2).
This article was written by John Tones and originally published in Spanish on Xataka.
Image | Warner Bros. Discovery | Disney
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