Key Takeaways:
- Warner Bros. Discovery shares dropped due to disappointing earnings and revenue results, attributed to a decrease in advertising revenue and Hollywood strikes.
- The Max streaming service saw growth, with subscribers increasing to 97.7 million, surpassing expectations.
- A potential merger with Paramount Global could add 63 million Paramount+ streaming subscribers to Warner Bros. Discovery’s existing base.
Warner Bros. Discovery (WBD) shares took a significant hit, dropping over 9% in intraday trading on Friday following the release of their earnings report. The entertainment giant’s earnings and revenue fell short of estimates, largely attributed to a decline in advertising revenue and disruptions caused by Hollywood strikes. Despite reporting a narrowed loss per share compared to the previous year, the fourth-quarter loss of 16 cents per share was steeper than what analysts had predicted. Additionally, revenue for the fourth quarter came in at $10.28 billion, down from $11 billion a year earlier, missing expectations. This decline in revenue was fueled by decreased TV advertising revenue and studio revenue, which was impacted by ongoing strikes involving writers and actors.
Amidst these challenges, Warner Bros. Discovery did experience a bright spot in subscriber growth. The company reported an increase in subscribers during the quarter, reaching a total of 97.7 million streaming customers by the end of the period. This marked growth from the 95.9 million reported in the previous quarter, indicating continued interest and engagement with their streaming services despite the broader financial setbacks.
The recent results coincide with reports of a potential merger between Warner Bros. Discovery and Paramount Global (PARA), a move that could significantly bolster Warner Bros. Discovery’s streaming subscriber base by adding 63 million Paramount+ subscribers to its existing 97.7 million. Paramount is scheduled to report its fourth-quarter earnings next week on Feb. 28.
Warner Bros. Discovery CEO David Zaslav expressed confidence in the company’s growth trajectory, highlighting achievements such as generating $6.2 billion in free cash flow and reducing debt by $5.4 billion in 2023. Additionally, the company announced plans to expand its Max streaming service into key international markets, signaling a commitment to further expansion.
However, despite these positive developments, Warner Bros. Discovery declined to offer financial guidance for 2024. This decision may reflect uncertainties surrounding future performance or strategic considerations.
The market reaction to these developments has been notable, with shares of Warner Bros. Discovery experiencing a 9.7% decline to $8.63 as of approximately 3:30 p.m. ET on Friday. This downward trend reflects broader challenges facing the company, as evidenced by a more than 45% loss in share value over the past year.