Hollywood faces the Cable-pocalypse

Media Giants Struggle as the Industry Faces Unprecedented Crisis

The media sector, particularly linear television, is undergoing a deep and relentless crisis. Warner Bros. Discovery (WBD) and Paramount, two giants in the industry, are facing enormous write-downs and economic difficulties, but WBD’s situation under CEO David Zaslav appears especially concerning.

Despite enjoying moments of luxury and socializing during the Paris Olympics, David Zaslav now finds himself managing an unprecedented corporate crisis. Upon returning from Paris, Zaslav had to confront the harsh reality: his television channels, which constitute the entirety of the company’s profits, have been devalued by about $9 billion. This, combined with a 6.2% drop in quarterly revenue, has highlighted that the merger between WarnerMedia and Discovery may have been a mistake.

Though Zaslav has tried to reassure investors about the bright future of Max, the streaming service that added 3.6 million subscribers in the last quarter, the overall situation of the company remains critical. WBD’s market valuation has plummeted, with a drop of about 70% since the merger was completed in April 2022. This devaluation is accompanied by growing distrust from analysts and investors, who have further lowered the company’s stock price target.

Other major media companies are facing similar challenges. Paramount announced a $6 billion write-down related to its television division, despite successfully making its streaming service profitable. Disney has also reported profits in the streaming sector but has seen a drop in its stock due to problems in its parks and television divisions.

This “Cable-pocalypse” is entering a darker and more uncertain phase, with investors increasingly doubting the possibility of a recovery. Warner Bros. Discovery, with a market value reduced to around $17 billion and a debt totaling approximately $38 billion, is in an especially precarious position.

Zaslav, criticized for his management, has been accused of losing the support of the creative community and making wrong choices, such as failing to secure NBA rights—a significant blow to the company. However, some analysts argue that despite these mistakes, few executives could have done better in such a complex situation.

The merger between WarnerMedia and Discovery, conceived as a lifeline for both companies in a rapidly declining television market, has turned into a trap. Zaslav’s attempts to navigate this crisis are hampered by a series of challenges, including a struggling advertising market and the need to cut operating costs. His ability to find a way out of the crisis will determine the company’s future in the coming months.

In summary, the traditional media sector is facing an unprecedented crisis, with companies like Warner Bros. Discovery and Paramount grappling with enormous write-downs and growing investor distrust. Zaslav’s leadership is under scrutiny as the industry heads toward an increasingly uncertain and difficult future.

Source: Puck