Warner Bros. Discovery Reports 94.9M Combined Streaming Subscribers, Misses on Revenue as Advertising Takes a Hit

Warner Bros. Discovery Reports 94.9M Combined Streaming Subscribers, Misses on Revenue as Advertising Takes a Hit

Warner Bros. Discovery now has 94.9 million combined subscribers across its streaming services, led by HBO Max and Discovery+, the company reported in its quarterly earnings report Thursday. That is up from 92.1 million last quarter. Wall Street had been expecting a gain of about 3 million subscribers.

On the company’s earnings call, CEO David Zaslav said that the combined streaming service will now launch in spring 2023, ahead of the original summer 2023 timeline. He also said that the company will be “aggressively tackling” the ad-supported streaming market next year.

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“We have a unique opportunity to increase our addressable market and drive value, and we intend to move quickly,” he said. “Stay tuned.”

There are “always a huge number of people who don’t want to pay,” he added.

The plan would be to leverage the company’s large TV and film library, with some licensed elsewhere (perhaps non-exclusively) to launch without needing to order new series.

WBD reported earnings of $9.8 billion and a loss of $2.3 billion, missing Wall Street expectations of $10.4 billion in revenue. The large loss was mostly due to substantial restructuring charges and writedowns tied to the merger.

In particular, a tough macroeconomic environment hit WBD’s advertising business, which was down about 11 percent from a year ago. It’s worth noting that WBD does not benefit as much from political advertising which flows mostly to local TV stations, or from the NFL.

Advertising revenue in Q3 was $2 billion, while distribution revenue was $5 billion. The company took $1.5 billion in restructuring costs, as well as $2.2 billion in depreciation and amortization costs.

At the company’s studios business, revenue was $3.1 billon, down 5 percent from a year ago due to fewer theatrical releases, and lower home entertainment revenue. That was partly offset by lower operating expenses.

Merger costs also impacted WBD’s bottom line, with EPS of $0.95, also missing Wall Street estimates. The company warned last month that it expects to see total restructuring costs of as much as $4.3 billion, due to writedowns related to content, as well as layoffs and restructuring charges.

“A significant amount of change is required,” Zaslav said on the call. “In fact we see this as presenting a meaningful opportunity, one that we have seized wholeheartedly. To look inside each of our businesses and really determine what’s working and what’s not working.”

However, the company did increase its expected cost synergies related to the merger.

“We are reimagining and transforming the organization for the future while driving synergy enterprise-wide, increasing our target to at least $3.5 billion, and making significant progress on our combined DTC product,” Zaslav said in a statement. “While we have lots more work to do, and there are some difficult decisions still to be made, we have total conviction in the opportunity ahead.”

Zaslav also addressed the recent hiring of DC Studios chiefs James Gunn and Peter Safran, saying that for them, running the division “is a passion project, not just a job,” and that they have a “powerful vision and blueprint that will drive a more unified and creative approach.”

And with regard to content, Zaslav elaborated on the company’s plans for linear TV, where he said network chiefs want to be cost-efficient, and not spend big money on shows that get beaten by reruns of The Big Bang Theory, and on the decision to remove and cancel content from the company’s streaming platforms and networks.

“We didn’t take one show off a platform that would help us in any way,” he said, adding that they want to “replace those shows with content that has a chance to be more successful, and have a larger audience.”

And he emphasized a desire to lean into franchises, citing DC Comics, The Lord of the Rings movies, and the Harry Potter franchises as potential growth areas.