Warner Bros Discovery blamed factors such as a tough advertising environment and costs associated with its post-merger restructuring, for its third-quarter earnings miss. The company reported its third-quarter earnings results on Thursday. The company saw its shares drop more than 5 percent in Thursday’s after-hours, after falling 5.6 percent to $11.97 during the regular trading session.
The company’s CEO David Zaslav also announced that the merged version of HBO Max and Discovery+ will be arriving earlier than the scheduled time. The company had earlier announced that this merged version will be available by summer but it will now have a spring release date.
Warner Bros Discovery reported revenue of $9.82 billion for the third quarter, falling short of analysts’ expectation of $10.36 billion, according to Refinitiv. It also reported a loss per share of 95 cents.
Newly-merged company Warner Bros Discovery is the combination of Warner Media and Discovery. The merger was completed earlier this year, and since then, Warner Bros Discovery has been embarking on cost-cutting measures which include cutting down on staff and taking down content from HBO Max.
In a company release issued on Thursday, CEO David Zaslav said that “While we have lots more work to do, and there are some difficult decisions still to be made, we have total conviction in the opportunity ahead.”
While on an earnings conference call that took place later, he added that “In fact, we see this a meaningful opportunity, one we seized wholeheartedly to look inside each of our businesses and see what’s working, what’s not working, is it structured properly, and does it have the right resources.”
The company’s valuation has been reduced to almost half in the last year. Wall Street has also reduced its expectations of global streaming subscriber growth. Streaming services have been in competition for subscribers. Earlier this year, Netflix lost about 200,000 subscribers. The company is, however, back on its feet. In the third quarter, Netflix surpassed all the expectations of analysts and also added 2.41 million net global subscribers, more than what it had projected in the previous quarter.
“I believe that the grand experiment of chasing subscribers at any cost is over,” CEO David Zaslav said on the Thursday earnings call. He also added that Warner Bros Discovery’s focus will be generating $1 billion in earnings before interest, taxes, depreciation, and amortization from its streaming business by 2025.
The company also noted that in the last three years, HBO Max has not increased its subscription prices, putting it in a good position to do so when it relaunches as a combined platform with Discovery+.
Like Netflix, the company will be embarking on plans to launch a free, ad-supported streaming service.
Warner Bros Discovery said that it added 2.8 million direct-to-consumer streaming customers in the third quarter. This brings its total to 94.9 million global subscribers. Revenue from its direct-to-customer segment, however, declined 6 percent to $2.3 billion. The company also saw a decline in licensing and distribution revenue.
The company’s film studio segment saw revenue drop 5 percent year on year to almost $3.09 billion. Last year, Warner had more theatrical releases. In late October, the company said in public filings that it estimated it would book $1.3 billion to $1.6 billion in pre-tax restructuring charges during the third quarter. The restructuring is expected to be substantially completed by the end of 2024 and will incur approximately $3.2 billion to $4.3 billion in total pre-tax restructuring charges.
The company’s TV networks segment also saw a decline. It declined 8 percent to $5.2 billion. This segment was affected by an 11 percent drop in revenue from advertising.
The company expects the tough advertising environment, and other factors to affect the company’s fourth-quarter results, according to CFO Gunnar Wiedenfels who added that these factors remain the greatest determinants of the company’s performance in 2023.