Despite Growth in Streaming, Warner Bros. Misses Q1 Estimates

Warner Bros. Discovery ( WBD ) reported first-quarter results that missed analyst expectations on both the top and bottom lines, despite strength in its streaming unit. The company's stock fell nearly 4% in premarket trading. The company, which owns streaming service Max, a portfolio of cable TV networks including TNT and Discovery, and a film studio, said revenue fell 7% to $9.96 billion compared to the same quarter last year. The net loss attributable to the company was $966 million, or 40 cents per share, an improvement from the year-ago quarter when it reported a loss of $1.07 billion, or 44 cents per share.

The company said total adjusted earnings before interest, taxes, depreciation and amortization were down roughly 20% during the first quarter to $2.1 billion, noting its "Suicide Squad: Kill the Justice League" video game generated significantly lower revenues. Streaming growth was strong, with 2 million direct-to-consumer streaming subscribers added during the quarter, bringing its total to 99.6 million. Advertising revenue for streaming proved to be a bright spot, increasing 70%, boosted by higher engagement on Max in the U.S. due in part to subscriber growth in the streaming service’s ad-lite tier and the launch of sports on the app.

The earnings release follows an announcement this week that Warner Bros. Discovery ( WBD ) would bundle its streaming services with those of Disney, tying together Max, Disney+, and Hulu, and offer it to consumers this summer, a callback to the traditional pay-TV package. Pricing has yet to be disclosed, but it will be offered at a discount. This marks the first time two media giants are joining forces to offer a streaming bundle as the push to make streaming profitable continues.

On the sports front, CEO David Zaslav said that media rights negotiations with the NBA are still ongoing, and he is “hopeful to reach an agreement that makes sense for both sides.” NBCUniversal recently made an offer to once again own the rights, and Warner Bros. Discovery ( WBD ) began offering NBA games on Max last fall.

TV networks revenue was down 8% to $5.13 billion, with advertising revenue down 11%. While the ad market has been soft for some time now, recent quarterly earnings show there has been improvement for digital and streaming while traditional TV lags behind. Warner Bros. Discovery’s studio segment revenue was down 12% to $2.82 billion compared to the same quarter last year, weighed down by the lackluster release of the latest iteration of “Suicide Squad” and the lingering effects of the Hollywood writers and actors strikes last year.

Warner Bros. Discovery ( WBD ) has been working to reduce its debt load, which now stands at $43.2 billion, stemming from the merger of Warner Bros. and Discovery in 2022.