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Warner Bros. Discovery Stock Tumbles Amid Media Industry’s ‘Generational Disruption’

Warner Bros. Discovery shares nosedived more than 16% in recent trading, marking the sharpest single-day decline in over two years for the media conglomerate. At 1:20 p.m. ET, the stock was trading at a sobering $9.72.

The drop came in the wake of the company’s third-quarter earnings report, which not only fell short of Wall Street forecasts but also painted a gloomy picture for the advertising market and the media industry’s future. Analysts had anticipated a loss of $0.08 per share, but the actual figure doubled that, coming in at $0.17 per share. This miss is symptomatic of broader challenges within the media landscape, where ad revenue is waning amidst an unstable macroeconomic climate. Warner Bros. Discovery felt the brunt of this downturn, with a reported 12% fall in ad spending across its television networks.

The company’s financial woes have been exacerbated by the recent Hollywood strikes, which stalled numerous productions. “TV revenue declined significantly primarily due to certain large licensing deals in the prior year and the impact of the WGA and SAG-AFTRA strikes,” Warner Bros. Discovery noted.

During the earnings call, CEO David Zaslav rang the alarm bells, highlighting the media sector’s arduous journey through what he described as a “generational disruption.” He pointed out the struggle of maintaining competitive momentum when operating a streaming service hemorrhaging billions.

This period marks the first complete quarter since the introduction of the Max streaming service, which melds HBO Max and Discovery programming. However, the subscriber count dipped by 700,000 to 95.1 million, falling short of the anticipated 95.4 million.

Gunnar Wiedenfels, the CFO, expressed doubt about meeting the company’s debt-to-earnings target ratio by the end of 2024 without a significant rebound in the TV advertising sector and a resolution to the strike-induced standstills.

Investors, now on edge, are eagerly awaiting Disney’s earnings report post-Wednesday’s closing bell. The results will undoubtedly serve as a crucial indicator for the state of the entire media industry, which is currently navigating one of the most transformative periods in its history.