Here’s a more realistic way to put it: WBD just took a $9 billion accounting hit because it concluded that its legacy TV assets aren’t worth nearly as much as it thought — probably because they won’t have NBA games to show after the season ends next season. For context, WBD’s entire market cap is about $18 billion.
Investors reacted to the news by sending the company’s shares down more than 8%.
Yes. So what’s next?
If you or I buy something and it turns out we overestimated its value too much, bad things can happen.
But the thing about massive corporate writedowns in America is that even though they represent an admission of failure, Wall Street tends to be silent when they happen.
That’s largely because it’s not a surprise. The market has already decided that this thing isn’t working, and it’s already reflected in its stock price. And that’s what’s been happening with WBD — its stock has been declining for most of its two-plus years of existence.
WBD CEO David Zaslav promises Wall Street that everything will be fine, and that his digital future looks great. The problem is that traditional TV networks, like TNT, TBS and TLC, are in long-term decline but still making meaningful profits. Which makes it hard for them to do anything one way or the other.
In his words, there are “difficult conditions in the old business.”
This is one of the big problems with the breakup plan the company tried last month — who wants to own the non-working part of the company?
It turns out that WBD also realized the plan wouldn’t work, and grounded its trial balloon this week. The new plan, says the Financial Times,is selling smaller parts of the company. Perhaps a Polish broadcasting company, or part of its gaming business.
But remember, Zaslav’s other plan is consolidation: he says he wants to buy things, even though many people think he’ll be the one being bought. Today’s news has put his company in the hands of a potential buyer.
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