WBD loses 1.8 million streaming subscribers after Max launch

Love & Death

Warner Bros. Discovery (WBD) lost 1.8 million streaming subscribers in the most recent quarter, which saw the launch of its combined streaming service Max.

Global DTC numbers for HBO, Discovery+ and Love & Death streamer Max, which rolled out in May, dropped to 95.8 million at the end of Q2 2023, compared to 97.6 million at the end of the first quarter.

Streaming revenue rose to $2.73bn, up 14% on $2.22bn from the prior year quarter, and was driven by a 25% ad revenue gain from year-on-year subscriber growth. WBD also noted that content revenue grew “significantly” driven by “certain library licensing deals.”

However, streaming losses stood at $3m in the quarter, a far smaller figure to swallow than the $518m loss in the same period in 2022, but still a bitter pill after the $50m profit reported in Q1 2023.

Nevertheless, WBD president and CEO David Zaslav said that the DTC business “is tracking well ahead of our financial projections”, in the foreword to Q2 2023 earnings release.

David Zaslav

Network declines

WBD networks segment revenues stood at $5.76bn, down by 5% on the prior year quarter, while distribution revenue decreased 1%, primarily driven by “increases in US contractual affiliate rates,” which WBD said were “more than offset” by declines in US pay-TV subscribers.

Advertising revenue in the networks segment also dropped by 13%, due audience declines in domestic general entertainment and news networks and soft advertising markets, predominantly in the US, but also internationally.

WBD said that the absence of the NCAA March Madness Final Four and Championship this year, which it broadcast in the prior year, negatively impacted the year-over- year growth rate. Content revenue increased by 18%, driven by “inter-segment content licensing to DTC.”

Cash flow & writer’s strike

Total WBD second quarter earnings rose by 22 percent to $2.15bn, though revenues dropped by 4% to $10.36bn.

Net loss narrowed to $1.24bn from $1.86bn in the prior quarter, and down from $3.4bn a year ago, including $1.66bn of “pre-tax amortization from acquisition-related intangible assets and $146 million of pre-tax restructuring expenses.”

The company generated $1.7bn of free cash flow during the quarter, and is expecting a similar number in Q3, with Zaslav commenting on the earning call that: “The important work we are doing to transform our businesses for the future continues to drive our strong financial performance as demonstrated by meaningful improvements to our balance sheet and our now increased synergy target of more than $5bn.”

Efforts to hit this $5bn+ savings target, which have included huge cuts to both staff and content, appear to be paying off, wth WBD revealing it repaid $1.6bn of debt during Q2 and ended the quarter with $3.1bn of cash on hand. WBD launched a debt tender offer today for up to $2.7bn more.

Zaslav also revealed on the call that the company has saved around $100m in the quarter due to the WGA strike and, speaking a day before the union reopens talks with US studios, the WBD chief said: We’re hopeful that all sides will get back to negotiating and that these strikes get resolved in a way that the writers and actors feel they are fairly compensated and their efforts and contributions are fully valued.”

He added: “We’ve all got to fight to get this resolved”.