“Corporate America's Dumbest” Award Goes to Warner Bros' $9 Billion Oopsie

Imagine buying a dream house, only to discover two years later it's built on a sinkhole. That’s pretty much what happened when Warner Bros. admitted they’d overvalued their TV networks by a jaw-dropping $9 billion. Yep, you read that right – billion, with a "B". If this isn’t a “someone’s getting fired” moment, I don’t know what is.

With NBA games and the legendary “Inside the NBA” crew – Ernie, Shaq, and Charles Barkley – potentially slipping through their fingers after next season, Warner Bros. is left holding the bag on some seriously overestimated assets. The stock market, predictably, didn’t take this news well. Warner Brothers stock is currently down over 9% since the news dropped.

This financial faceplant is just another chapter in the saga of the disastrous 2021 merger between Warner Bros. and Discovery. When this deal was inked, it was supposed to create a media powerhouse. Instead, it’s been more of a Frankenstein’s monster.

David Zaslav, WBD’s CEO, tried to put a positive spin on things. “It’s fair to say that even two years ago, market valuations and prevailing conditions for legacy media companies were quite different than they are today,” he said. Translation: He and his team completely f’d up, and there’s really no excuse.

The media giant's toilet bowl spiral reflects a broader realization: traditional TV is circling the drain. Advertisers are flocking to digital and streaming platforms. WBD CFO Gunnar Wiedenfels hands shaking and all, added his two cents, emphasizing that the impairment reflects a shift in business models. “While I am certainly not dismissive of the magnitude of this impairment, I believe it’s equally important to recognize the value shift across business models,” he said. Basically, he’s saying, “Yeah, we lost all your money, but look at our shiny new streaming service!”

So, what now? WBD execs floated the idea of breaking up the company last month, which is corporate speak for, “This merger was a trainwreck.” But who wants to buy the parts of a business that are sinking? Their latest brainstorm is to sell off smaller chunks – maybe a Polish broadcasting company or pieces of their gaming business. I know this sounds like a late night show parody, but I didn’t make that up. It’s like selling your car’s hubcaps because the engine is dead.

Meanwhile, Zaslav is still pushing for consolidation. He wants to buy stuff, but with the stock price tanking, it’s more likely WBD will be the one getting bought. Today’s news made the company a lot more affordable for potential buyers.

In the midst of all the chaos, there is some light poking through in the crack of the door: WBD’s streaming service, Max. It added 3.6 million subscribers last quarter, bringing the total to 103.3 million. Too bad Max only makes up about 26% of the total business. But nevertheless, Zaslav is banking on the success of Max, with plans to form streaming bundles with Disney+ and ESPN, and to keep expanding internationally.

This is just more evidence that traditional TV isn’t what it used to be. WBD’s $9 Billion mistake is a big red warning sign for anyone thinking mergers = automatic money. Sometimes, they’re just a really expensive scam.

Stock.News does not have positions in companies mentioned.