In this photo, the Warner Bros. Discovery logo appears on a smartphone screen.
Rafael Henrique | SOPA Images | Lightrocket | Getty Images
Discovery by Warner Bros reported first-quarter results on Thursday, missing analysts’ expectations on both the top and bottom lines despite streaming unit strength.
The company’s stock rose 3% on Thursday.
Here’s how Performed by Warner Bros. Discoverycompared to estimates of analysts surveyed by LSEG:
- Loss per share: 40 cents versus an expected loss of 24 cents
- Income: $9.96 billion versus $10.231 billion expected
Warner Bros. Discovery — which owns streaming service Max, a portfolio of cable TV networks including TNT and Discovery, and a movie studio — said revenue fell 7 percent to $9.96 billion compared with the same quarter last year.
Warner Bros. Discovery posted a net loss attributable to the company of $966 million, or 40 cents per share, an improvement from the year-ago quarter, when it reported a loss of $1.07 billion, or 44 cents per share.
The company said total adjusted earnings before interest, taxes, depreciation and amortization fell about 20% in the first quarter to $2.1 billion, noting that the Suicide Squad: Kill the Justice League video game brought in significantly lower revenue.
Increase flow
Warner Bros. Discovery said Thursday it added 2 million direct-to-consumer streaming subscribers during the quarter, bringing its total to 99.6 million.
That segment earned an adjusted $86 million during the quarter, an improvement of $36 million from the prior quarter, the company said. It also saw revenue rise “modestly” to $2.46 billion from the previous quarter.
Ad revenue for streaming proved to be a bright spot, growing 70%, boosted by higher Max engagement in the US, driven in part by growth in subscribers to the streaming service’s ad-lite tier and the launch of sports on the app.
The earnings release follows an announcement this week that Warner Bros. Discovery bundles streaming services with its own Disney — connecting Max, Disney+ and Hulu — and bringing it to consumers this summer, a throwback to the traditional pay TV package. Pricing has yet to be revealed, but it will be offered at a discount, CNBC reported.
It marks the first time two media giants have joined forces to offer a streaming bundle as the push for profitable streaming continues. While TV networks have long been a cash cow for media companies, the bundle continues to bleed subscribers.
“As you know, I’ve been a big proponent of bundling,” said the Warner Bros. CEO. Discovery’s David Zaslav on Thursday’s earnings call. He noted that subscribers would have to stick with the package to take advantage of the cheaper pricing offer, which would then reduce so-called churn, referring to people ditching their subscriptions.
“Turnover is the killer in this business, and we’ve focused too much on it,” Zaslav said, adding that bundling has been a big help in reducing churn. “We need to go to this… in an attack situation.”
The entertainment streaming package marks the second partnership with Warner Bros. Discovery and Disney in recent months. Companies, along with Fox Corp., previously announced a sports streaming joint venture to launch this fall.
Sports rights
Jaylen Brunson #11 of the New York Knicks drives to the basket during the game against the Indiana Pacers during Game 1 of the 2024 NBA Playoffs on May 6, 2024 at Madison Square Garden in New York, New York.
Nathaniel S. Butler | National Basketball Federation | Getty Images
On the sports front, Zaslav said Thursday that media rights negotiations with the NBA — which has long been a staple on cable channel TNT — are still ongoing and he “hopes to reach an agreement that will it makes sense for both sides.”
NBCUniversal recently made a bid to re-own the rights, formerly CNBC mentionted. Zaslav noted that while the company has implemented strategies for various outcomes, its deal with the NBA includes the right to match any other offers before the league makes a decision.
Last fall, Warner Bros. Discovery started offering NBA games on Max.
The company has Max available worldwide, and Zaslav noted Thursday that it will enter more European markets ahead of the Summer Olympics in Paris. While NBCUniversal owns the U.S. rights to the Olympics, airing the games on its television networks and streaming service Peacock, Warner Bros.’ Max. Discovery will be the streaming home in Europe.
TV, Studios weakness
Elijah Wood as Frodo in “The Lord of the Rings” film trilogy.
Courtesy: New Line Cinema
Although ad revenue was strong in streaming, it remained weak for Warner Bros. TV networks. Discovery, as well as for the segment as a whole.
TV network revenue fell 8% to $5.13 billion, with advertising revenue down 11%. While the ad market has been soft for some time, recent quarterly earnings show there has been an improvement for digital and streaming, while traditional TV is lagging behind.
Meanwhile, Warner Bros. studio division revenue Discovery fell 12% to $2.82 billion compared to the same quarter last year. The division has been weighed down by the unlikely release of the latest iteration of Suicide Squad and the lingering effects of the Hollywood writers’ and actors’ strikes last year.
On Thursday, Zaslav said the company is trying to “bring the sparkle back” to its film studio. As part of this, he announced that work is underway on the final Lord of the Rings installment, with an expected release in 2026.
The company’s cash position improved, with free cash flow rising to $390 million, a $1.3 billion improvement from the same quarter last year, the company noted.
Warner Bros. Discovery is working to reduce its debt, which now stands at $43.2 billion, stemming from the merger of Warner Bros. and Discovery in 2022. On Thursday, the company said it paid down $1.1 billion in debt during the quarter and also announced a $1.75 billion cash tender to further reduce its debt.
Disclosure: Comcast NBCUniversal is the parent company of CNBC and co-owns Hulu.