Warner Bros Discovery’s third quarter was mixed with “Barbie” coins and free cash flow favored by Wall Street, offset by sluggish advertising and the impact of the actors’ strike on one of the industry’s biggest content creators.
Streaming, which was profitable in the first quarter ahead of most rivals but lost $3 million in the second quarter, was back in the black at $111 million, despite a net loss in subscribers as Discovery+ users continued to to migrate to Max, therefore to discovery programs . The number of subs fell from 95.8 million in the second quarter to 95.1 million in the third quarter. Streaming revenue rose 5% to $2.4 billion, driven by price increases across the streaming landscape and modest increases in digital advertising revenue.
This quarter, CNN Max successfully launched in late September, followed by the debut of the Bleacher Report Sports add-on.
WBD’s total operating income of $9.98 billion rose 1%, in line with Wall Street consensus. The company reported a narrower net loss of $417 million and recorded restructuring and other charges of more than $1.7 billion.
A decline in linear television, coupled with ongoing recession fears, is hitting parts of the advertising ecosystem. Network advertising revenue fell from $1.9 billion to $1.7 billion.
Total Networks revenue was $4.8 billion, compared to $5.2 billion last year. Content and distribution revenue also fell.
The strike put a heavy burden on WBD. In early September, the company expected adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $300 million to $500 million for the full year 2023 due to the work stoppage — including the now-resolved writers’ strike. Last quarter’s consolidated EBIDTA of more than $2.9 billion, an increase of 22%, beat expectations.
A solution with SAG-AFTRA seems obvious, but this is now the third quarter in which the Hollywood strikes play a major role. WBD and other media assumed that the industrial action would be completed in September, and it happened in November.
The studios’ income increased thanks to theater and film productions Barbie. The nun II was the sixth film in The Conjuring Universe to exceed $250 million worldwide. As a franchise, The Conjuring
According to WBD, Universe has grossed nearly $2.3 billion worldwide, the most of any horror franchise.
Game sales also increased after the release of Mortal Kombat 1 and other performance of Hogwarts legacy. However, television revenues fell significantly, largely due to the impact of the WGA and SAG-AFRA strikes.
Free cash flow is a strong story. Also in its September note, WBD raised its full-year FCF expectations to at least $5 billion. Free cash flow is expected to exceed $1.7 billion in the third quarter Barbie and the strike, which cuts costs. More than $2 billion has been raised.
Released on July 21, the Greta Gerwig-directed film has grossed $1.4 billion worldwide, making it the studio’s biggest release ever.
The free cash flow will allow the company to slowly pay down its large debt load, which ballooned after Discovery acquired Warner Media from AT&T. WBD said it repaid $2.4 billion in debt in the quarter and ended September with gross debt of $45.3 billion.
“I am very pleased with the strong financial results our company delivered in the third quarter. This is highlighted by adjusted EBITDA growth of 22% and free cash flow of more than $2 billion. This puts us on track to deliver significantly more than $5 billion this year and grow from our nearly $12 billion in debt service to date,” said CEO David Zaslav. “Highlights include our direct-to-consumer business having another profitable quarter with adjusted EBITDA of $111 million and our first launch of their new live programming offering with CNN Max and the Bleacher Report AddOn showing signs of contributing to greater engagement and lower customer churn at Max. We have made great progress in just 19 months and are excited to build on this strong momentum as we focus on driving future growth and achieving long-term value for our shareholders.”
Executives will hold a conference call at 8:00 a.m. ET.
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Source: Deadline
Bernice Bonaparte is an author and entertainment journalist who writes for The Fashion Vibes. With a passion for pop culture and a talent for staying up-to-date on the latest entertainment news, Bernice has become a trusted source for information on the entertainment industry.
