Warner Bros. Discovery’s Streaming Profits Hit $50 Million, Says U.S. Streaming Business Will Be Profitable By 2023 – The Hollywood Reporter

warner bros discovery With 97.6 million global streaming subscribers at the end of March, compared to about 96.1 million at the end of 2022, it surpassed the forecast the entertainment conglomerate disclosed in the first quarter. Earnings I will report on Friday. Importantly, the streaming division posted a profit of $50 million for him compared to a loss of $654 in the same period last year and his loss of $217 million. in the fourth quarterWall Street attributes this streaming success to continued progress toward management’s pledge to make the business sustainably profitable and a promise not to chase subscribers at any cost. You will notice it as a sign that

Warner Bros. Discovery said: CEO David Zaslav On becoming the first Hollywood giant to turn a profit in the streaming sector since an entertainment CEO set his sights on making a profit on his D2C business. Talking about the “meaningful transformation”, he added:

Wells Fargo analyst Stephen Cajor, in his earnings preview, had predicted a streaming loss of $76 million, but “higher selling, general and administrative expenses related to the relaunch of Max We expect losses to increase to $344 million in the second quarter.”

Warner Bros. Discovery on Friday reported quarterly revenue of $10.7 billion, down 6%, in line with analyst expectations, but earnings were lower than expected. The company’s first-quarter loss of 44 cents a share marked a swing from last year’s earnings of 69 cents per share, compared with Wall Street’s consensus of a loss of 5 cents a share. . But if you exclude the costs associated with his WarnerMedia merger of Discovery and AT&T, the company would have beaten consensus earnings estimates.

The company’s loss for the quarter of $1.07 billion included “pre-tax amortization of $1.81 billion from acquisition-related intangible assets and pre-tax restructuring charges of $95 million.”

Zaslav’s team has focused on growing free cash flow, a profitability metric that shows how much money a company has left after meeting its financial obligations. However, Warner Bros. Discovery on Friday reported negative free cash flow of $930 million for the first quarter due to interest and sports rights payments.

WBD shares were down more than 4% in pre-market trading at 8:30 am ET.

The mega deal that created the company was completed in April 2022, just over a year ago. “And a lot of positive evidence is emerging, with direct-to-consumer sales being perhaps the most prominent.”

On Friday’s earnings conference call, Zaslav added: We had a different take on it. ’” he continued. It’s hard to run a business when you’re bleeding profusely. “

Management also International Given that the streaming business is less mature and faces spending to launch new markets, it will turn profitable later.

various wall streets Analysts became bullish As management focuses on free cash flow, debt reduction and streaming profitability, Warner Bros. Discovery is the focus this year.

of Company announced in mid-April The company will combine HBO Max and its Discovery+ streaming service into rebranded Max, which is set to launch in the US on May 23. The goal is to make Max the streaming destination for everyone in the home with a new tagline, “The One to Watch.” In addition to offering the company’s library products and new intellectual property, Max double down About such a beloved franchise as live-action Harry potter Scripted TV series and new works big bang theory and game of thrones.

Q1 streaming revenue reached $2.46 billion, down 1% excluding the impact of foreign exchange. Our direct-to-consumer (DTC) ad-supported tier,” the company said. Content revenue decreased 16% due to lower third-party licensing of HBO content. Due to lower content write-offs, the closure of CNN+, and “more efficient marketing spending,” streaming unit operating expenses fell 24% to his $2.41 billion.

Studio unit adjusted earnings before interest, depreciation and amortization (EBITDA) decreased to $607 million in the first quarter, down 23% excluding the impact of foreign exchange on lower revenues. Studio revenue was $3.21 billion, down 7% due to “reduced TV licenses, theatrical movie rentals and, to a lesser extent, home entertainment revenue,” the company said. “TV licenses decreased primarily due to certain large TV licensing deals in the prior-year quarter and lower theatrical releases.
availability. Theatrical movie rentals Batman However, ‘Other income’ was up 30% due to increased studio production services and ‘continued attendance at Warner Bros. Studio Tour in London and Hollywood’.In addition, in the first quarter Hogwarts Legacy is the biggest release ever for Warner Bros. Games and is the company’s “best-selling game of the year with over $1 billion in retail sales”.

WBD’s Networks segment posted EBITDA of $2.29 billion in the first quarter, with revenues down 10% to $5.58 billion excluding foreign exchange and operating expenses driven by costs related to the 2022 Olympics 10% decrease due to factors such asyear period and ‘lower
Domestic general entertainment content costs were partially offset by increased domestic sports rights and costs related to the unconsolidated BT Sports joint venture in the UK and Ireland. Revenue declined due to a 3% decline in distribution revenue “primarily driven by a rise in US contractual affiliate rates, offset by a decline in US pay-TV subscribers.”
Ad revenue was down 14%. This is “primarily due to a decline in viewership in general domestic entertainment and news networks, and a weak advertising market, primarily in the United States and, to a lesser extent, certain international markets.”

The company also noted that the broadcast of the 2022 Winter Olympics in Europe had a negative impact on year-over-year growth in its most recent quarter.

On Friday’s earnings call, Zaslav said WBD is “actively working” on adding sports and news offerings to Max over time, noting that such live programming “will help consumers reach more I can continue to stay longer in search of things,” he said. He later advertised that Max would give his team an opportunity to reduce subscriber churn.

Speaking about Warner Bros. and touting its 100th anniversary this year, Zaslav stressed that “this studio has historically been a jewel of the industry and is working hard to restore it to its former glory.” . He touted, “Many of the industry’s most talented storytellers have chosen to partner with us, and it’s meaningful creative momentum.”

“After a very difficult year at the box office,” Zaslav touted the upcoming film release with: Dunes: Part 2, barbie, blue beetle and flash“We are committed to not only expanding the size of our films in the coming year, but more importantly, making impactful, great quality films.” He repeated his past comment of “how good it is, not how much”.

Zaslav also said his team is focused on “revitalizing the feature-length animation business” and is “working hard (with studio leadership) to develop a new slate,” said former head of DreamWorks Animation. You mentioned the recent hiring of Managing Director Bill Damaschke.

Discussing WBD’s international streaming strategy, the company hopes to operate or launch its own streaming services in “most markets” but does not expect any short-term profits from its own streamers. The market said it would license the content. as India. He added that at the end of any such licensing deal, it would consider whether it would likely run its own profitable streaming service.

WBD CFO Gunnar Wiedenfels joked in a phone call on Friday that it’s been a year since the mega-merger and that it “frankly feels like it’s been about three years.” company.

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