Warner Bros. Discovery Inc. (NASDAQ: WBD) is the house that Zaslav built. He was once the highly successful CEO of midsized media company Discovery. Then came a marriage of AT&T’s Warner Media and Discovery in April 2022. Since then, the company has fallen apart like a cheap watch. (These are America’s most hated companies.)
According to recent government filings, Warner Bros. Discovery has $50 billion in debt. Many of Zaslav’s decisions are based on his ability to make payments. The Wall Street Journal reported on the company’s rising trouble: “Warner Bros. said it is now targeting full-year adjusted earnings, before interest, taxes, depreciation and amortization, of $10.5 billion to $11 billion, down by $500 million on both the lower and upper bounds from guidance issued last month.”
No wonder the stock is down 11% in the past year while the market is 15% higher.
In its most recently reported quarter, revenue rose 5% to $10.4 billion. However, Warner Bros. Discovery lost $1.2 billion. Its studio figures were acceptable but will be hurt by the current writer and actor strikes. For the period, revenue at the studios dropped 8% to $2.6 billion. Adjusted EBITDA rose 28% to $306 million. However, adjusted EBITDA is not based on GAAP rules and is a poor way to measure success or lack thereof.
Streaming revenue rose 23% to $2.7 billion, and adjusted EBITDA was close to breakeven. However, Warner Bros. Discovery’s streaming business is under the same pressure as its rivals. There are too many services and too many losses.
In public, Zaslav’s largest disaster is CNN. It has run through two CEOs. Its yearly profits have dropped below the $1 billion mark, which is a level that has signaled success for years. A change in programming wrecked CNN. Many industry observers believe that cannot be reversed.
Zaslav was supposed to be Big Media’s best executive. He was certainly paid that way for years. Now, what he put together is falling apart. Warner Bros. Discovery’s board should do what has been done at CNN and find someone to fix the company, which is a long shot.
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