Warner Bros. Discovery, the parent company of left-leaning news network CNN, has faced a sharp decline in its stock price as weak TV advertising caused earnings to fall short of forecasts. Investors are now concerned about the company’s financial projections.
Warner Bros. Discovery stock fell roughly 12 percent late last week before recovering slightly Friday afternoon. According to the company, TV advertising revenue fell approximately 14 percent in the most recent quarter, pulling down earnings.
Many in the media industry have anticipated a recovery in TV ad spending. However, as the recent Warner Bros. Discovery earnings miss demonstrates, this has failed to develop. Reports cite economic conditions in Biden’s economy as a driver of this trend, where rampant inflation has strained household budgets nationwide.
Furthermore, over the past few years, the consumer trend of cord-cutting has undeniably impacted the TV advertising space, where viewers have been ditching cable for streaming services in droves. As millions of Americans turn to other outlets for entertainment, the business model built around traditional television viewership will be forced to adapt or become obsolete.
Reports suggest that Warner Bros. Discovery is attempting to get ahead of this trend, moving its entertainment to its streaming services. For example, the company opted to add CNN for free to its streaming platform Max.
Warner Bros. Discovery CEO David Zaslav has taken various initiatives to improve the financial performance of the media giant, such as purging significant amounts of content, much to the dismay of consumers. “This business is not without its challenges,” Zaslav said recently during a quarterly earnings call. “Among them, we continue to face the impacts of ongoing disruption in the pay TV ecosystem and a dislocated, linear advertising ecosystem. We are challenging our leaders to find innovative solutions.”
Zaslav recently spoke about a planned sports streaming joint venture with Disney and Fox to expand the reach of Warner Bros. Discovery and counteract the impact of cord-cutting on the businesses. The companies are reportedly targeting over 60 million sports fans as a target market.
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“Today, when people are thinking, ‘What channel should I watch? What channel is my sport on?’ You’ll be able to go to this new product, this new app-based product, and if you watch the baseball playoffs, you’ll watch all of them and you won’t be thinking, ‘What channel is it on?’ Hockey, you’ll watch all of the hockey playoffs, right through the Stanley Cup,” Zaslav said.
Zaslav continued explaining the ambition to create a more seamless consumer experience with Fox and Disney by bringing the sports venture in house in a “do it ourselves” mentality. The CEO further noted the abandonment of the “channel” mentality.
“I’ve always advocated that we should do it ourselves. … In some ways, the sports venture is trying to meet that very need. When you put our product together with [Disney and Fox], it just has a much better, more fluid, more simple consumer experience. It’s not ‘Which channel is it on? Where do I go? How do I go? Do I have it? Don’t I have it?’ It’s in one place. More and more, we’ll be gravitating toward that,” he continued.