Warner Bros. Discovery Misses Q1 Expectations, TV Ad Sales Down 11% as Streaming Revenue Flat

Warner Bros. Discovery reported its first-quarter 2024 earnings Thursday, revealing it had reached 99.6 million paid streaming subscribers in a tough quarter for studios and networks.

That’s a growth of nearly 2 million subscribers from the 97.7 million subs across HBO and streamers Max and Discovery+ that Warner Bros. Discovery reported for the end of 2023.

On Wednesday, WBD and Disney announced a deal to launch a streaming bundle with Max, Disney+ and Hulu this summer. Pricing wasn’t disclosed.

WBD’s overall net loss for the first quarter of 2024 was $966 million. Free cash flow stood at $390 million. The company paid $515 million in net interest expense in Q1.

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Streaming revenue was flat compared with the year-earlier period, at $2.5 billion. Streaming ad sales rose 70% to $175 million vs. $103 million for Q1 2023. Content revenue was down 46% and distribution inched up 1%. The segment reported adjusted earnings before interest, taxes, depreciation and amortization of $86 million, up from EBITDA of $50 million in Q1 2023.

For the first quarter of the year, networks revenue fell 8% at $5.13 billion. TV ad sales were down 11% at $1.99 billion. Distribution revenue dropped 7%. Content sales were a bright spot, up 8%.

Studios revenue dropped 12% year over year to $2.8 billion, primarily due to a gaming slump, with “Suicide Squad: Kill the Justice League” not performing as well as massive hit “Hogwarts Legacy” in the comparable Q1 2023. Warner Bros. Discovery said it took an impairment charge for “Suicide Squad: Kill the Justice League,” as the DC game generated “significantly lower” revenue than “Hogwarts Legacy.”

The success of “Dune: Part Two” helped on the theatrical side at studios, but it’s important to note the majority of box office revenue from that title goes to WBD’s co-studio Legendary. For TV studios, the impact of the WGA and SAG-AFTRA strikes were felt, as fewer episodes of WBD content aired in Q1, though HBO did push out splashy titles include “True Detective: Night Country” and the final season of “Curb Your Enthusiasm.” In home entertainment, WBD reports material growth due to releases of “Wonka” and “Aquaman and the Lost Kingdom.”

Wall Street forecast a loss per share of 24 cents on $10.23 billion in revenue, according to analyst consensus data provided by LSEG. Warner Bros. Discovery reported a diluted loss per share of 40 cents $9.96 billion in revenue.

On the call with analysts, CEO David Zaslav briefly addressed ongoing negotiations with the NBA, after WBD’s exclusive negotiating window to renew media rights lapsed last month. “We are in continuing conversations with [the NBA] now, and we are hopeful we will be able to reach an agreement that makes sense for both sides,” he said. Zaslav noted that WBD has matching rights for “third-party offers,” appearing to nod to recent reports that NBCUniversal has entered the bidding for NBA rights.

Warner Bros. Discovery stock closed Wednesday at $7.89 per share. The regular U.S. stock markets will reopen at 9:30 a.m. ET, but pre-market trading indicated WBD stock was down 4.5% and nearing an all-time low.

WBD announced Thursday that it would repurchase $1.75 billion of debt. During Q1, it repaid $1.1 billion of debt to end the quarter with $43.2 billion of gross debt.

“We are pleased with our progress in the first quarter as evidenced by strong results in important KPIs,” Zaslav said in a letter to shareholders. “We delivered meaningful growth in our streaming business with a nice acceleration in ad sales, generating nearly $90 million in positive EBITDA for the quarter. We will soon be rolling out Max to 29 countries across Europe, and the content lineup for Max over the coming year is one of our strongest ever. Warner Bros. Pictures also had a strong start to the year as the first studio to reach $1 billion in both overseas and global box office, and they have a great slate in the works. Importantly, we once again delivered strong free cash flow, even in our seasonally weakest FCF quarter. We continue to make bold moves to transform our company for the future as we position ourselves to take full advantage of the opportunities ahead.”

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Reinaldo Massengill

Update: 2024-08-04

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