The Warner/Discovery tax write-offs make financial sense because it allows the companies to write off the cost of the merger on their taxes. This is a significant saving for the companies, and according to Bleeding cool, “WBD will be taking content & development write-offs and impairments to the tune of $2.8B-$3.5B”.
Most of the debt originated with Warner. Studios. The studio had been in financial trouble since the early 1970s, and by the end of the decade, it was clear that the company was in danger of bankruptcy. In 1979, Warner Bros. was sold to Seven Arts Productions, a company also in financial trouble. The new owners put the studio up for sale, but there were no takers. In 1981, Warner Communications, the parent company of Warner Bros., merged with Time Inc. to form Time Warner. The new company was in no better financial shape than the old one, and Warner Bros. continued to lose money until the most recent spin-off and merger.
According to NASDAQ: “Per the agreement was structured as a Reverse Morris Trust transaction, AT&T received $40.4 billion in cash and WarnerMedia’s retention of certain debt.” The debt was estimated to be $53 billion at the time, and Zaslav needed to cut $3 Billion this year off the debt.
So David Zaslav is keeping true to his word to shareholders and is stabilizing the financial standing of WBD. If WBD were an old building, we would look at all the innards in a dumpster in the parking lot. Yes, this isn’t pleasant, and the people who work there are not happy, but the renovation has just started. It’s going to get better if they continue to meet their goals.