S&P confirms: Cable television is in decline

People continue to watch quite a lot of television, but less and less classical television. S&P downgraded Warner Bros. Discovery's rating outlook from "stable" to "negative," citing declines in the media company's cable business that could worsen with the potential loss of broadcast rights to National Association games of Basketball. The cable TV business, which makes about half of Warner Bros Discovery's revenue, is struggling with declining advertising revenue and consumers ditching cable TV services as they switch 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 its outlook reflects expectations that Warner Bros Discovery's debt levels will remain high as the decline in cable TV affects its ability to pay down debt quickly. The rating agency reaffirmed the "BBB-" credit rating for the company. Warner Bros Discovery had gross debt of $41.4 billion as of June 30 after repaying $1.8 billion in the second quarter. S&P said the potential loss of the NBA's TV broadcast contract after the 2024-25 season would make matters worse. Last month, the NBA granted Walt Disney's ESPN, Comcast-owned NBCUniversal and Amazon.com the rights to broadcast the league's games, ending a four-decade partnership with Warner Bros. Discovery. The company filed a lawsuit against the NBA after the league rejected its equal offer for the Amazon package. The NBA contributed greatly to the company's bottom line. The company's user base grew to 103.3 million, helped by cheaper products, supported by advertising and Max's expansion into new markets. "WBD's film and television library...gives it the tools to turn it into a compelling streaming service, and its ability to translate its strong asset base into sustained growth will be key to offsetting the declines linear," S&P said. Repositionings are now expected in this huge market.