Warner Bros. Discovery says it overpaid for its TV networks by $9 billion

WBD CEO David Zaslav, seen here talking to Tom Cruise at the Paris Olympics, says his TV business is worth a lot less than he thought just a few years ago

Last month, executives at Warner Bros. Discovery floated the idea of breaking the company up — a tacit acknowledgment that the 2021 deal to merge Discovery with the company formerly known as Time Warner has been a bust.

Here’s a more concrete way of acknowledging that: WBD just took a $9 billion accounting hit because it has concluded that its aging TV assets aren’t worth nearly as much as it thought — perhaps because they won’t have NBA games to show after the next season. For context, WBD’s entire market cap is about $18 billion.

Investors reacted to the news by pushing the company’s stock down by more than 8%.

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If you or I buy something and it turns out we overestimated its value by a lot, bad things can happen.

But the thing about giant write-downs in corporate America is that while they are admissions of failure, Wall Street tends to be pretty muted when they happen.

In large part that’s because they’re not a surprise. The market had already decided this thing wasn’t working, and it was already reflected in its stock price. Which is what’s been happening at WBD — its stock has been in decline for most of its two-plus years of existence.

WBD CEO David Zaslav is promising Wall Street that everything is going to be fine, and that his digital future looks great. The problem is his traditional TV networks, like TNT, TBS, and TLC. They are in long-term decline but still generate meaningful profits. Which makes them hard to do anything with, one way or another.

In his words, there are “tough conditions in the legacy business.”

This is one of the big problems with the break-’em-up plan the company tried out last month — who wants to own the part of the business that isn’t working?

And, it turns out, WBD has also realized that plan won’t work, and killed off its trial balloon this week. The new, new plan, says the Financial Times, is to sell smaller chunks of the company. Maybe a Polish broadcasting company, or a piece of its games business.

But remember that Zaslav’s other plan is consolidation: He says he wants to buy stuff, though lots of people think he’ll be the one getting bought. Wednesday’s news made his company that much more affordable to a prospective buyer.