S&P lowers outlook for Warner Bros Discovery to 'negative' on cable TV decline
S&P lowered its outlook on Warner Bros Discovery to "negative" from "stable", citing declines in the media company's cable TV business that could worsen with the potential loss of broadcast rights for the National Basketball Association games.
The cable TV business, which brings in about half of Warner Bros Discovery's revenue, has been struggling with a slump in ad dollars and cord-cutting by consumers shifting to streaming.
That forced the company to write down the value of its TV assets by about USD9.1 billion earlier this month.
S&P said on Fri its outlook reflected expectations that Warner Bros Discovery's debt levels would stay high as the cable TV declines weigh on its ability to quickly pay down debt.
It reaffirmed the "BBB-" investment-grade credit rating for the company.
Warner Bros Discovery had gross debt of USD41.4 billion as of Jun 30, after it repaid USD1.8 billion in the second quarter.
S&P said the potential loss of the broadcast TV contract for the NBA after the 2024-2025 season would worsen the challenges.
Last month, the NBA awarded Walt Disney's ESPN, Comcast-owned NBCUniversal and Amazon.com rights to carry the league's games, ending a four-decade old partnership with Warner Bros Discovery.
The company filed a lawsuit against the NBA after the league rejected its matching bid for Amazon's package.
The NBA has contributed heavily to the company's profit through ad dollars across its linear TV portfolio and streaming services, Max.
The company's direct-to-consumer user base grew to 103.3 million, helped by cheaper ad-supported products and expansion of Max to new markets.
"WBD's deep film and TV library ... give it the tools to make it a compelling streaming service, and its ability to translate its strong asset base to sustained growth will be key to offsetting linear declines," S&P said.
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MonkeyGee : I see the humor here. They increase outlook, and the stock goes down. They lower Outlook, and it goes up. I wonder if they are trading against their recommendations. Na.... that would be illegal, they wouldn't do any illegal.
bullrider_21 OP MonkeyGee : How ironic.