24/7 Wall St. Insights

• Warner Bros. Discovery Inc. (NASDAQ: WBD) stock dropped 10% after its poor quarterly report.
• It is hard to imagine CEO David Zaslav is the person who can take the company forward.
• Also: Dividend legends to hold forever.

Warner Bros. Discovery Inc. (NASDAQ: WBD) turned in a remarkably poor quarter, which included a $9.1 billion write-down in the value of its TV assets. The stock dropped 10% after the announcement and is now off 46% in the past year, while the S&P 500 is 15% higher. CEO David Zaslav, the architect of the entire disaster, needs to be replaced.

Zaslav created Warner Bros. Discovery in April 2022. He mashed together the AT&T Warner Media assets with those of the TV channel company Discovery. The “synergies” were supposed to create cost cuts and help drive the growth of several streaming products. It never happened.

Revenue in the most recent quarter dropped 6% compared to last year to $9.7 billion. The loss for the quarter was $10 billion, including the write-off. In the same quarter a year ago, the loss was $1.2 billion. Free cash flow plunged 43% to $976 million. Both revenue and earnings missed Wall Street expectations.

The number of streaming media subscribers increased by 3.6 million to 103.3 million. Warner Bros. Discovery is far from first place in the streaming industry, which includes behemoths Netflix and Amazon, as well as second-tier Disney, Max, and Apple. Except for Netflix (and perhaps Amazon), the margins in streaming are razor-thin, and customers are fickle.

There is little evidence Warner Bros. Discovery’s results will improve much. Certainly, it is hard to imagine that Zaslav, who created and destroyed the company, is the person who can take it forward.

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