HBO Max/Discovery+ Merger

[Bruce]

Sounds like Fox is just hedging their bets.

More like they finally came to the realization that Traditional Paid Live TV is dying, not coming back.

First was the lost of per sub fees, now the advertising market has totally dropped, not just for Traditional, but for streaming also, because of too many options.

Now, spending way too much on sports rights, losing a lot of money on them, need new income to cover those contracts.

Disney probably doesn't care since they've always been counting on ESPN OTT.

Hence why they will not make it too expensive.

Of course, WBD and Zaslav have no idea what's going on, per usual

That is a understatement.

 

[NashGuy]

What's interesting to me is Fox is leading the charge on Venu. They are providing the tech and the management team. Yet, they're willing to also throw their content to ESPN as an add-in. Look, I think multiple avenues to sell your thing is better, not worse, but I also think Fox might end up losing a ton of money if they're trying to build a thing from scratch or license in the tech. It always struck me odd that Disney didn't take the charge on Venu, given they already own the BAMTech tech that could easily power the whoe thing.

I think Fox realizes that they're in a very dangerous situation now, with expensive sports rights but no DTC distribution for them. I think their strategy in the past was to keep all those sports exclusive to linear, to prop up the value of their locals and cable nets. But fighting against the cord-cutting trend is a losing proposition, so they either must create a DTC path(s) or just license that stuff out to other companies' DTCs. (Note that they have a non-exclusive licensing agreement in place with Hulu for next-day access to Fox primetime shows.)

Fox may end up being forced to roll out their content (e.g. local Fox station plus all the Fox Sports cable content) on a standalone DTC basis, so they could repurpose the Venu tech/app for that if it came to it. That wouldn't preclude them, of course, from also distributing that same content as add-ons any other way they could, e.g. ESPN, Prime Video Channels, Apple TV Channels, the Roku Channel, etc. (That, BTW, is also the future I envision for HBO if/when Max folds and HBO reverts to being a standalone/a la carte service: sell via their own app but also as add-ons to lots of bigger apps that already have a ton of credit cards on file.)

 

[Bruce]

Warner's 2nd Quarter report was released and it is pretty terrible-

• Loss per share: 36 cents vs. a loss of 22 cents expected
• Revenue: $9.7 billion vs. $10.07 billion expected

$9.1 billion charge related to the devaluation of the company's TV networks.

The $9.1 billion goodwill impairment charge, which is a non-cash, pre-tax figure, comes after an asset reevaluation that accounted for the difference between the "fair value" and "book value" of the networks, which have changed due to continued softness in U.S. linear ad market and uncertainty around affiliate and sports rights renewals, including the NBA, two years after the close of WarnerMedia and Discovery's merger.

Warner's net loss for the quarter was $10 billion.

As of June 30, it had $41.4 billion in gross debt and $3.6 billion cash on hand.

Warner Bros. Discovery reported an adjusted loss of $107 million for its direct-to-consumer segment in Q2.

In the studio segment, revenue was down 4% year over year at $2.4 billion. TV revenue was down 27%, video games revenue dropped 41% and box office was up 19%.

While the Box Office was up, revenues largely went to production companies, for example, Godzilla X Kong and Dune Part Two were produced by Legendary, who receive 80% of Warner's share from the Box Office.

Warner Bros. Discovery Takes $9.1 Billion Balance Sheet Hit for Massive Drop in TV Network Values

Warner Bros. Discovery reported its Q2 earnings Wednesday, which included a $9.1 billion charge related to the devaluation of its TV networks.

variety.com

https://www.cnbc.com/2024/08/07/warner-bros-discovery-wbd-earnings-q2-2024.html#:~:text=Total%20revenue%20for%20the%20quarter,decreased%2015%25%20to%20%241.8%20billion.

 

[KAB]

"The Heat is On"

https://www.cnbc.com/2024/08/08/warner-bros-discovery-ceo-david-zaslav-to-deliver-value-for-shareholders.html

 

[Yespage]

That $9.1 billion write-down seems awfully shady. Magically wipe away tax considerations.

Their debt to cash ratio seems problematic. But they took in $10 billion in the quarter.

 

[lakebum431]

That $9.1 billion write-down seems awfully shady. Magically wipe away tax considerations.

Their debt to cash ratio seems problematic. But they took in $10 billion in the quarter.

That's not how taxes work. This is a write-down of an intangible asset that would have been setup in purchase accounting. The only tax impact is a book/tax adjustment. It doesn't actually change the income tax paid or calculated.

 

[Yespage]

That's not how taxes work. This is a write-down of an intangible asset that would have been setup in purchase accounting. The only tax impact is a book/tax adjustment. It doesn't actually change the income tax paid or calculated.

Thanks. I'll stop pretending I know anything about corporate taxation.

 

[Yespage]

MLB playoffs will, in part, be on Max according to an email. The email also noted:

Select games available on B/R Sports Add-On, on us for a limited time​

I'll take the free access for this longer "limited" time. I'm just curious when the limited time ends. The trouble they'll have is that people get accustomed to the free and when it goes away, there will be angst.

 

[Bruce]

MLB playoffs will, in part, be on Max according to an email. The email also noted:

​

​ ​ Select games available on B/R Sports Add-On, on us for a limited time​

I'll take the free access for this longer "limited" time. I'm just curious when the limited time ends. The trouble they'll have is that people get accustomed to the free and when it goes away, there will be angst.

It would be extremely idiotic to start charging an extra $9.99 a month (rumor).

What they should do, is have it part of their most expensive tier only, which is $20.99.

It is more likely that people will pay the extra for that, $4.00 more, instead of $10.

Then people will have to subscribe direct with Warner, since that package is not available with Cable/Satellite, Warner then does not have to share the monthly subscription fee with Providers, which their share is about 30%.

 

[Yespage]

Forcing people that are getting it "free" to pay a lot more, effectively paying for it twice, is going to piss people off even more.

 

[ncted]

Still waiting for my free Max sub to expire after cancelling my AT&T Fiber back in July. I'd really like to get HDR, but as long as it is free...

 

[Bruce]

Warner 3rd Quarter Report is out, Max gained 7.2 Million subscribers.

They claim the DTC part of the company is profitable.

The rest of the company is a dumpster fire, revenue down for TV Channels and the movie division.

Debt was down the last few quarters, now back up to $40 Billion, net income was only $135M, that was only because to a $1.6 billion pre-tax cost relating to "acquisition-related amortization of intangibles, content fair value step-up and restructuring expenses."

Basically, Wall Street talk.

Free cash flow was down a significant 69% to $632 million.

Expected to be worse next quarter with the disaster Joker 2 was, they were counting on that movie making over a billion dollars, like the first one did, instead, it will lose over $200 Million.

The only big movie Warner has in the 4th Quarter, is a Lord of the Rings anime movie.

Warner Bros. Discovery Sees Streaming Subs Rocket To 110 Million As International Rollout Gathers Pace, But Q3 Revenues Dip With Box Office Down

Warner Bros Discovery added more than seven million net subscribers in Q3 2024 to reach 110.5 million, as its international Max rollout gathered pace.

deadline.com

 

[Bruce]

Warner Bros. Discovery (WBD) CEO David Zaslav has renewed his call for increased consolidation in the streaming industry, arguing that the current fragmented landscape is unsustainable. Speaking at an investor during its earnings call this week, Zaslav emphasized the need for more mergers and acquisitions (M&A) to address the challenges faced by both consumers and streaming providers.

"It's not sustainable," Zaslav stated, referring to the proliferation of streaming services and the complexities faced by users in navigating their offerings and pricing. "There probably should have been more meaningful consolidation."

Possible Translation-

Someone, please buy or merge with the company, before we have to declare Chapter 11.

Warner Bros. Discovery Wants Max to Merger With Other Streaming Services | Cord Cutters News

Warner Bros. Discovery (WBD) CEO David Zaslav has renewed his call for increased consolidation in the streaming industry, arguing that the current fragmented landscape is unsustainable. Speaking at an investor during its earnings call this week, Zaslav emphasized the need for more mergers and...

cordcuttersnews.com

 

[ncted]

"It's not sustainable," Zaslav stated, referring to the proliferation of streaming services and the complexities faced by users in navigating their offerings and pricing. "There probably should have been more meaningful consolidation."

Too bad no one pointed out the proliferation of new cable channels that artificially raised prices was unsustainable 15 years ago.

 

[b4pjoe]

Too bad no one pointed out the proliferation of new cable channels that artificially raised prices was unsustainable 15 years ago.

Which is what he would love to return to.

 

[Bruce]

Which is what he would love to return to.

That ship has definitely sailed.

When the majority of under 45 year olds, no longer has paid Live TV, should tell him something.

 

[Bruce]

Went to MAX's site to cancel, since I thought my deal ($139 for the year-4K Plan) was up in March.

Found out it was actually up in May, but I still went to cancel, expecting offers up till then, it offered me the same $139 4K deal, which I accepted, will start up in May of course.

Service is not worth $23 a month, but at a $10.60 a month average, was a no brainer on my part.

 

[navychop]

I gather you watch a lot of movies. Anything else on Max?

 

[klang]

I gather you watch a lot of movies. Anything else on Max?

There are some scripted series. I watch some.

 

[navychop]

TKS. I'll have to look things up.