Too Much TV: Your TV Talking Points For Wednesday, August 7th, 2024

The dumpster fire that is Warner Bros. Discovery

Here's everything you need to know about the world of television for Wednesday, August 7th, 2024:

PRODUCTION NOTES
My apologies for the later than normal newsletter. I spent most of the evening attending some hockey games with my son. He and my wife are huge NY Islanders fans and in July and August they go to weekly games hosted by the summer hockey league "Da Beauty League," which includes NHL players and hot college prospects playing three 4-on-4 games a night every Wednesday. They've also added a woman's division, which is really entertaining. 

I'm not at all a hockey fan, but I was all in when my wife had a work conflict and couldn't go this week. It was a fun time with my son and a chance to hang out at the games and have dinner together.

THE DUMPSTER FIRE THAT IS WARNER BROS DISCOVERY
The Warner Bros Discovery earning were earlier today and it's difficult to over-emphasize how terrible they were. The company did a massive $11.2 billion worth of write-downs and impairment charges.

To put that in perspective, that amount represents about 25% of the company's valuation when the merger between Discovery Communications and Warner Media was completed two years ago. Even worse, the company's stock price has shed about 70% of its value since the merger. And despite the efforts of CEO David Zaslav to gloss over the impact, the loss of the NBA is likely to have a huge future on the value of TNT and its ability to continue to command one of the highest carriage rates in the cable industry.

That latter issue is a large reason why WBD decided to write-down $9.1 billion at its networks division to align the book value of its linear television business with the reality of the situation. But it's not just problems at TNT. The linear TV market is continuing to collapse and while the old Discovery/Scripps Network channels had held up better than most in the industry, even those old stalwarts are showing their weakness.

WBD also reported another $2.1 billion of “pre-tax acquisition-related amortization of intangibles, content fair value step-up, and restructuring expenses.” The company didn't explain more about those charges, which is also worrying. 

Based on the phrasing, I can parse out a couple of likely issues. "Pre-tax acquisition-related amortization of intangibles," refers to the timing of tax deductions for intangibles that are considered worthless. The amount of the deduction is determined by amortizing the adjusted basis of the intangible ratably over the 15-year period beginning with the month in which the intangible was acquired. So this appears to be an issue related to how quickly some assets have essentially lost all value.

"Content fair value step-up," is another tax issue and it's a complicated enough issue I won't spend the time explaining it in depth. But it has to do with revaluing (or stepping up) assets from what was paid for them to what the fair market value would be if they were sold.  It's basically a way to try and lower the capital gains costs when you sell off assets.

So in both cases, this seems to be a mix of trying to come up with the lowest tax impact for the company as well as revaluing some assets in a way that would maximize the positive tax impact when WBD sell them. Of course, we have no idea what those assets might be. But it's worth noting that these are the kind of moves that WBD investor John Malone is notorious for doing. It's all legal. But it's also the type of thing you do when you are attempting to move money around in order to make the company look better on paper.

Looking through WBD's earnings report, there are so many red flags concerning the direction of the business. Licensing revenue was down. There was a 35% reduction in TV content expense. Which means a lot less shows were being produced. Just about every revenue metric was down, and while the company's total global direct-to-consumer subscriber base showed an increase of 3.6 million global subscribers vs. Q1, all of that appears to come from outside the United States, since the company notes "a 7% increase in subscribers following the launch of Max in Latin America in 1Q24 and in Europe in 2Q24, partially offset by continued domestic linear wholesale subscriber declines."

I am going to write more about this in the coming days, as I speak to more people about the specifics of the report. But Warner Bros. Discovery appears to be in a continuing financial freefall. And while some of the problems facing WBD are industry-wide, CEO Davis Zaslav and his executive team continue to make decisions which almost feel designed to make the situation more dire. 

TWEET OF THE DAY

BUILDING YOUR PERFECT $50 A MONTH TV BUNDLE
I have a long piece posting tomorrow afternoon that will offer up suggestions for people looking to get as much TV as they can for $50. I'll have breakdowns for the best options if you want live TV, if all you care about is sports, if you're a reality and unscripted TV fan and more. It's been an interesting challenge and while you can't get everything you want, there are ways to get enough for $50 to keep most people satisfied. 

I'll be highlighting the piece in tomorrow's newsletter and I hope you'll find it useful and pass it along to as many people as possible. 

ODDS AND SODS
* Season two of Colin From Accounts will premiere Thursday, August 26th on Paramount+. One of the highlights from the recent CBS set tour at the TCAs was seeing critics who had slept on the show falling in love with it after seeing an episode from the upcoming season. Odds are that you haven't seen it yet, either. So this is your chance to get caught up.

WHAT'S NEW TONIGHT AND TOMORROW

WEDNESDAY, AUGUST 7TH:
* Dance Moms: A New Era Series Premiere (Hulu)
* Delico's Nursery Series Premiere (Crunchyroll)
* Finding Amelia (Discovery)
* Let's Make A Deal Season Premiere (CBS)
* Lolo And The Kid (Netflix)
* Love Is Blind: UK Series Premiere (Netflix)
* Mission Cross (Netflix)
* Murder At The Truck Stop (Investigation Discovery)
* No Way Out: The Roulette Series Premiere (Netflix)
* Sea Change: The Gulf Of Maine Finale (PBS)
* See No Evil Season Premiere (Investigation Discovery)
* The Zone: Survival Mission III (Hulu)
* True Beauty Series Premiere (Crunchyroll)

THURSDAY, AUGUST 8TH:
* Are You Sure? Series Premiere (Disney+)
* Dying For Revenge (Britbox)
* Kennedy, Sinatra, And The Mafia (Sundance Now)
* Kold x Windy (ALLBLK)
* Mr. Throwback Series Premiere (Peacock)
* One Fast Move (Prime Video)
* Shahmaran (Netflix)
* Stepmom From Hell (LMN)
* Taken Together: Who Killed Lyric And Elizabeth? (Max)
* The Mallorca Files (Prime Video)
* The Shakedown (Prime Video)
* The Umbrella Academy Season Premiere (Netflix)
* Tyler Perry's Ruthless Season Five Premiere (BET+)

SEE YOU ON THURSDAY