Warner Bros Discovery matched Wall Street estimates for revenue in the first quarter, with $10.7 billion, but posted a wider-than-expected loss due to tough comparisons with the year-ago period.
Net losses reached 44 cents a share, worse than the 5-cent loss analysts had forecast and swung to the red from year-ago profit of 69 cents a share.
Streaming, though, proved a rare bright spot, posting $50 million in EBITDA after several quarters in the red. CEO David Zaslav pronounced it a “meaningful turn” in a positive direction and the company said it now expects the streaming operation to become profitable on a full-year basis in 2023, a year earlier than expected.
Streaming subscriptions, spanning HBO Max and Discovery+ rose by 1.5 million to reach 97.6 million, beating forecasts. The company had previously said direct-to-consumer streaming would break even this year and then hit the black by 2024. Later this month, HBO Max and Discovery+ are combining in a revamped service called Max. In a departure from initial plans, execs said earlier this year that Discovery+ will remain available as a stand-alone option for consumers, so the blending of services is not an all-or-nothing proposition.
The direct-to-consumer division reported quarterly revenue of $2.455 billion, while operating expenses declined 24% to $2.4 billion.
Revenue in the Studios division slid 7% to $3.2 billion, with the company citing tough comparisons with the year-earlier quarter, when it released The Batman and made a number of lucrative TV licensing deals.
The Networks division saw a 10% drop in revenue on a pro forma basis, with advertising falling 14%. The company blamed the downturn in advertising on “audience declines in domestic general entertainment and news networks” as well as general softness in the ad market.
It has been a little more than a year since the close of the $43 billion merger of WarnerMedia and Discovery, with AT&T remaining a large stakeholder. The company has promised investors $4 billion in cost savings from the combination, up from an initial forecast of $3 billion. Zaslav said when the company reported results for the previous quarter that the “bulk of our restructuring is behind us,” adding, “we are one company now.”
Spring earnings season has been a bumpy ride for media companies. Paramount Global suffered its worst single-day stock decline as a company — 28% — on Thursday after reporting soft results, though most of the hit came because the company slashed its dividend. Still, a challenging economic environment, the complexity of the transition to streaming and wariness by advertisers have combined to make it tough going in the media business.
Shares in WBD are below where they started out after the merger’s completion, but have perked up a bit in 2023 after a major slump in late-2022. They slipped a couple of percentage points in pre-market trading as investors processed the earnings report.