Warner Bros. Discovery’s credit rating is now junk, and it is all due to people cutting the cable TV cord.
As of this writing, Warners Bros. Discovery stock (WBD) is worth just $10.33 per share. Five years ago, it was worth $22 per share. Twelve years ago, it was worth $44 per share. Earlier this week, in a desperate bid to save its market value, WBD split into two separate publicly traded companies. Today, WBD’s credit rating was downgraded by Moody’s to junk status.
It gets better.
WBD is $31 billion in debt. This downgrade means “the entertainment giant’s debt will no longer be eligible for Bloomberg’s high-grade index. The company is likely to become one of the largest issuers of junk bonds,” reports Yahoo Finance.
WBD is also CNN’s parent company, and CNNLOL, along with WBD’s other cable channels, is considered a poison pill, the kind of dying asset no one wants to invest in. That’s why WBD split up. One publicly traded WBD company will contain growth assets like the television and movie studios that produce content, HBO Max, HBO, and the studio’s vast library.
With only the good stuff in that company, WBD is hoping to get a pop out of the stock.
The other half, the other publicly traded company, will get all the poison pills, like CNN, TNT, and the Discovery Channel—all the linear cable networks except HBO. WBD is hoping investors jump on board with the understanding that there will soon be massive cost-cutting at those operations that should increase their value … temporarily.
This is all due to the death of pay TV (cable and satellite TV).
For some fifteen years, I’ve been telling you about how streaming and cord-cutting would create this scenario.
You see, Hollywood in its present form cannot survive without cable TV, because cable TV was a racket designed to ensure that no matter how low the ratings, the money kept flowing.
When 100 million households subscribed to pay TV instead of 55 million, WBD’s stock was sitting pretty, as was the stock of every other media company.
But it’s not 2005 anymore, so 100 million people no longer allow themselves to get ripped off by cable TV. That number is closer to 55 million today.
It wasn’t great content that kept WBD’s stock flying. No, it was carriage fees. It was 100 million American households paying $100 a month for their cable TV service, even though they didn’t watch 90 percent of the channels their package forced them to pay for.
The cable TV racket was nothing less or more than left-wing affirmative action. If you wanted Fox News and Turner Classic Movies, you were still forced to pay for ESPN, CNN, MSNBC, MTV, Comedy Central, and the rest. And those networks (and plenty more) received a piece of your bill. It worked like this…. CNN receives about $1 a month for every cable TV subscriber, which at one time added up to about $100 million a month and $1.2 billion a year, even though fewer than a million people watched.
Merit had nothing to do with the money these basement-rated channels drew in. They could never survive on merit, i.e., revenue based on advertising based on viewers. Too few people watch. And now there are half the subscribers. What’s more, cable providers are forcing carriage fees lower.
Streaming is merit-based. If you like the streaming service, you subscribe. It’s a beautiful thing, and what the studios are discovering is that not enough Americans enjoy their content to keep their streaming services profitable. The Disney Grooming Syndicate says it has lost $4 billion on its shitty, woke-ass streaming service. Disney, however, never lost money on its cable channels because merit had nothing to do with the money those channels made. Whether 50 million people watched the Disney Channel or only 11 people, the fortune made from the carriage fees was the same.
Netflix went first and is the only streaming outlet making decent profits. Netflix also delivers a ton of fresh content every week and shotguns it so something appeals to everyone.
What these other companies will have to do is this — merge. That’s all they can do in the hope their combined content attracts enough streaming subscribers to make money.
John Nolte’s first and last novel, Borrowed Time, is winning five-star raves from everyday readers. You can read an excerpt here and an in-depth review here. Also available in hardcover and on Kindle and Audiobook.
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