That’s right: Warner Bros. disclosed its impairment charge on Aug. 7, and then rival entertainment behemoth Paramount Global ($PARA) followed suit with a $6 billion impairment charge declared on Aug. 8. 

Both companies offer some fascinating — and eerily similar —  details about why they decided to take a goodwill impairment charge. Financial analysts following the sector should pay close attention, since understanding the how and why of these charges might help you anticipate goodwill impairment charges that other entertainment companies might report in the future.

First, a quick recap of the Warner Bros. impairment. As we discussed in our prior post about the company, Warner was carrying $22.1 billion in goodwill assets from its merger with Discovery Inc. back in 2022. The impairment arose from persistent poor performance in the company’s TV networks segment, which rested on two critical assumptions:

• A long-term growth rate for the Networks division of negative 3 percent.

• A discount rate of 10.5 percent, “reflective of the risks inherent in the future cash flows of the reporting unit and market conditions.” 

Lo and behold, Paramount made almost the exact same assumptions about its own TV networks business. Taken right from its footnote disclosure about the impairment charge:

• A long-term growth rate of negative 3 percent;

• A discount rate of 11 percent. 

So much like Warner Bros., Paramount management pretty much knew that its TV networks business was only going in a downward direction. Impairment was bound to happen sooner or later. 

Figure 1, below, shows quarterly revenue for Paramount’s TV Media segment for the last two years, just like we tracked with Warner Bros. Again, note the alarming trend line (in red).

An ironic twist: even as revenue from the TV unit has been falling in absolute terms, it has been accounting for more and more of Paramount’s total revenue — up from 62.7 percent of total revenue in mid-2022, to 67.6 percent in mid-2024. Heck, it even peaked at more than 70 percent of total revenue for a few quarters in 2023. 

Think about that. If your dominant operating segment is seeing revenue declines, then almost by definition your company is in profound strategic disarray. In that case, no wonder Paramount has been trying to sell itself for years, and finally sold itself to Skydance Media in July. 

Our point is simply that if financial analysts paid close attention to the details disclosed in the footnotes, and compared those details for Company A to peer companies B, C, and D, you’d be in much better shape to anticipate significant events such as billion-dollar impairment charges and sale of the company.

Calcbench does track all those details. All you need to do is start digging.