The
cable TV business, which brings in about half of Warner Bros
Discovery's revenue, has been struggling with a slump in ad
dollars and cord-cutting by consumers shifting to streaming.
That forced the company to write down the value of its TV assets
by about $9.1 billion earlier this month.
S&P said on Friday its outlook reflected expectations that
Warner Bros Discovery's debt levels would stay high as the cable
TV declines weigh on its ability to quickly pay down debt.
It reaffirmed the "BBB-" investment-grade credit rating for the
company.
Warner Bros Discovery had gross debt of $41.4 billion as of June
30, after it repaid $1.8 billion in the second quarter.
S&P said the potential loss of the broadcast TV contract for the
NBA after the 2024-2025 season would worsen the challenges.
Last month, the NBA awarded Walt Disney's ESPN, Comcast-owned
NBCUniversal and Amazon.com rights to carry the league's games,
ending a four-decade old partnership with Warner Bros Discovery.
The company filed a lawsuit against the NBA after the league
rejected its matching bid for Amazon's package.
The NBA has contributed heavily to the company's profit through
ad dollars across its linear TV portfolio and streaming
services, Max.
The company's direct-to-consumer user base grew to 103.3
million, helped by cheaper ad-supported products and expansion
of Max to new markets.
"WBD's deep film and TV library ... give it the tools to make it
a compelling streaming service, and its ability to translate its
strong asset base to sustained growth will be key to offsetting
linear declines," S&P said.
Warner Bros Discovery declined to comment.
(Reporting by Harshita Mary Varghese in Bengaluru; Editing by
Shilpi Majumdar)
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