Discovery of Warner Bros. reported its third-quarter results on Thursday, missing analysts’ expectations as it felt the effects of a difficult advertising environment and costs associated with its post-merger restructuring.
CEO David Zaslav also announced that the merged version of the company’s HBO Max and Discovery+ streaming services will arrive in the spring, earlier than the previously announced summer release date.
Here’s what the company reported against analyst expectations, according to Refinitiv:
- Revenue: $9.82 billion vs $10.36 billion expected
The company announced a loss per share of 95 cents, citing macroeconomic headwinds, particularly in advertising.
Shares fell more than 5% after hours on Thursday, after falling 5.6% to $11.97 in the regular trading session.
Warner Bros. Discovery is the result of a merger between WarnerMedia and AT&T’s Discovery, which was completed earlier this year. Since completing the merger, the company has taken major cost-cutting measures, such as laying off employees and pulling content from its HBO Max streaming service.
“While we still have a lot of work to do and some tough decisions to make, we are totally confident in the opportunity ahead,” Zaslav said in the company’s statement on Thursday.
Later, on an earnings conference call, he added: “In fact, we see this as a significant opportunity, one that we have taken wholeheartedly to look inside each of our businesses and see what works, what doesn’t, is it well structured and does it have the right resources.”
Over the past year, the valuation of Warner Bros. Discovery was nearly cut in half as Wall Street lowered its expectations for global streaming subscriber growth. Streaming services are competing for subscribers, with industry giant Netflix losing customers earlier this year and unveiling an ad-supported tier at a cheaper cost.
“I believe the great experiment of chasing subscribers at all costs is over,” Zaslav said on Thursday’s earnings call, adding that the company’s goal will be to generate $1 billion in earnings before interest, taxes, depreciation and amortization of its streaming business by 2025. .
Management also noted that HBO Max hasn’t increased its subscription price since its launch nearly three years ago, putting it in a good position to do so when it relaunches as a platform. combined with Discovery+.
The company is also moving forward with plans to launch a free, ad-supported streaming service, “aggressively attacking” the market and “moving fast,” Zaslav said Thursday. Ad-supported streaming services such as Foxis Tubi and World Paramount‘s Pluto TV have seen their audience grow and generate significant advertising revenue.
The company said it added 2.8 million direct-to-consumer streaming customers in the third quarter, bringing its total to 94.9 million subscribers worldwide. Revenue from the direct-to-consumer segment fell 6% to $2.3 billion as it saw lower licensing and distribution revenue.
The motion picture studios segment of Warner Bros. Discovery saw revenue decline 5% to nearly $3.09 billion from the same period last year, when Warner had more theatrical releases.
In late October, the company said in public filings that it estimated it would incur between $1.3 billion and $1.6 billion in pretax restructuring charges in the third quarter. The restructuring is expected to be substantially complete by the end of 2024 and will result in total restructuring charges of approximately $3.2 billion to $4.3 billion before tax.
Meanwhile, the advertising downturn has hit media companies.
Revenue from its television networks segment fell 8% to $5.2 billion. The segment was notably impacted by an 11% drop in advertising revenue.
The chief financial officer of Warner Bros. Discovery’s Gunnar Wiedenfels said advertising headwinds continued to affect the business in the fourth quarter, adding that they remained the biggest variable on the company’s performance in 2023.
On Wednesday, its industry counterpart, Paramount Global, announced its results, also missing analysts’ estimates as its TV and advertising revenues fell.
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