Cable TV biz crumbles
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Sarah Grillo/Axios
Paramount Global on Thursday took a $6 billion write-down on its cable TV business, the day after Warner Bros. Discovery did the same for $9 billion.
Why it matters: Both companies are struggling to convince Wall Street that their streaming bets will make up for those losses.
- Paramount Global's stock tanked 12% in after-hours trading Thursday, despite posting a streaming profit for the first time.
- Warner Bros. Discovery's fell 9% to an all-time low after its earnings release.
- Paramount's cable networks include MTV, VH1 and Comedy Central. WBD's include HGTV, Food Network, and CNN.
Between the lines: Both companies were created as a result of mega-mergers, yet neither are considered big enough to compete with Big Tech for streaming dominance.
- CBS merged with Viacom in 2019 to form ViacomCBS, now Paramount. WarnerMedia merged with Discovery to form WBD in 2022.
State of play: Paramount, which also said it would cut its U.S. workforce by 15% Thursday, said it's looking for a streaming partner, likely a big tech firm, to scale its Paramount+ streaming service.
- The company is slimming down ahead of its pending merger with Skydance Media.
- WBD had discussions with Paramount late last year to discuss a merger. While those talks didn't materialize, Wall Street isn't convinced that the firm has the scale necessary to compete on its own with Big Tech for streaming dominance.
- Losing its longtime NBA rights to NBC last month only reinforced the lack of leverage the firm has to investors.
- WBD also announced 1,000 layoffs earlier this summer.
The big picture: While cable is challenged, analysts believe there will be a loyal set of pay-TV customers — around 50 million households — for the foreseeable future, thanks to cable networks like ESPN that still own live sports rights.
- Despite WBD's efforts to invest in sports rights outside of basketball, losing the NBA package will cost it a lot of leverage with cable distributors. (The firm has sued the NBA to try to win the rights back.)
What to watch: Worried about losing any more confidence on Wall Street, entertainment giants are raising streaming prices to ensure their investments start to break even.
- Paramount announced yesterday that its streaming arm posted a profit for the first time last quarter. It announced price hikes to Paramount+ in June, effective later this month.
- Disney also posted a profit for the first time across its streaming division. It announced price hikes across Hulu, Disney+ and ESPN+ earlier this week, effective in October — meaning prices will have more than doubled since the rollout of Disney's basic package.
- Max, WBD's streaming service, began turning a quarterly profit last year, following price hikes and the combination of Discovery+ and its sister service, HBO Max.
