Warner Bros. Discovery reported disappointing first-quarter earnings, missing revenue forecasts and posting a loss per share that exceeded expectations. The company attributed these results to lower sales of the video game “Suicide Squad: Kill the Justice League” and declining television ad revenues due to decreasing viewership of their networks like HGTV and CNN. However, the company did see some positive news with the addition of 2 million streaming subscribers, bringing their total to 99.6 million. Despite a $1.9 billion hit from acquisition-related costs, Warner Bros. Discovery managed to exceed expectations in free cash flow, generating $390 million for the quarter.
CEO David Zaslav highlighted the company’s progress in key performance indicators, noting significant growth in their streaming business and an acceleration in ad sales, resulting in nearly $90 million in positive EBITDA for the quarter. However, the lackluster earnings results were overshadowed by a surprise announcement of a new streaming bundle partnership with Disney. This bundle, including Disney+, Hulu, and Max, will be available in ad-supported and ad-free versions on their websites starting this summer. The price for this new bundle was not disclosed.
The collaboration between Warner Bros. Discovery, Disney, and Fox Corp. will also extend to the launch of a sports streaming service featuring content from ESPN, ABC, TNT, TBS, TruTV, Fox, FS1, FS2, and BTN. Negotiations are ongoing to maintain the National Basketball Association rights, with Warner Bros. Discovery facing competition from NBCUniversal’s offer to pay $2.5 billion per year, double what Warner Bros. Discovery currently pays. The uncertainty of losing the NBA contract caused a 10% drop in Warner Bros. Discovery’s stock in a single day.
Despite the challenges, Warner Bros. Discovery remains focused on driving free cash flow over earnings to reduce its debt. The company continues to emphasize its commitment to growth and innovation in the streaming market, with a strong focus on expanding its subscriber base and ad sales. The new streaming bundle with Disney, along with the upcoming sports streaming service, are key components of Warner Bros. Discovery’s strategy to remain competitive in the evolving media landscape.
Overall, Warner Bros. Discovery’s first-quarter earnings results were mixed, with disappointing revenue and earnings overshadowing positive developments in streaming subscriber growth and free cash flow. The company’s alliance with Disney and Fox Corp. to launch new streaming services demonstrates its commitment to staying relevant in the highly competitive media industry. Moving forward, Warner Bros. Discovery will need to navigate challenges in securing content rights and retaining key partnerships to sustain its growth and remain competitive in the ever-changing media landscape.
