Warner Bros. Discovery reported an 11 percent drop in revenue for its fiscal second quarter, reaching $8.7 billion, below Wall Street expectations, according to the earnings report released Thursday.
Net income fell 91 percent, totaling $149 million. The second quarter includes the NBA playoffs, a major programming event that TNT Sports, a WBD subsidiary, did not carry this year.
The absence of live NBA games hit advertising revenue across multiple WBD platforms. Linear advertising fell 22 percent, with the loss of NBA content accounting for nearly all of that reduction.
The NBA began new rights deals with Amazon, ESPN and NBC Sports, agreements that followed national rights deals struck two years ago.
WBD CFO Gunnar Wiedenfels addressed the impact during the earnings call. Wiedenfels said the NBA has been a "negative driver on ad revenues" but a "positive driver on profits in the second quarter," more so than in the first quarter.
That profit benefit stems from the removal of NBA live-rights fees. WBD's operating expenses for its linear networks improved 30 percent year over year because of those eliminated costs.
Following an extended legal dispute, with NBA live rights now at other networks, WBD reached a new contract with the league focused on highlights and other intellectual property.
The company has added other sports content, including French Open tennis, college sports and existing rights for major events such as March Madness, MLB playoffs and NHL playoffs. That revised content approach produced strong upfront sales for the upcoming television year, as highlighted during May's upfront presentation.
The advertising revenue generated by the NBA's live games represents a gap WBD has not fully offset. A proposed merger is currently facing legal challenges. A group of 12 states has filed an antitrust lawsuit, with a trial scheduled for March 2027.
WBD President and CEO David Zaslav expressed confidence in the merger's completion. Zaslav said the company has "every expectation that the transaction will close" and that WBD will perform "even better than the plan that we presented to [Paramount] when we did our deal."
