WARNER Bros Discovery reported a surprise quarterly profit on Thursday (Nov 7) as cost controls and an Olympics-driven record jump in streaming subscribers helped make up for a lack of major box office hits from its studio.
Shares of the company rose nearly 10 per cent in premarket trading. The stock has lost about a quarter of its value so far this year.
The company’s Max streaming platform expanded into Europe weeks before the Olympic Games in Paris with exclusive rights to stream the highly anticipated sporting event, boosting subscribers.
Max also benefited from bundling the platform with Disney+ and Hulu, as well as the strong first season of The Penguin – a crime drama series released in September and based on a popular DC Comics villain.
WBD’s streaming business, home to the Max and Discovery+ services, added 7.2 million direct-to-consumer subscribers in the third quarter, beating estimates for 6.28 million additions, according to data compiled by Visible Alpha.
Max delivered its strongest quarterly subscriber gain since the platform’s launch, CEO David Zaslav said, calling it “a meaningful moment” that had capped two years of building the service and reversing millions of US dollars in losses.
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The streaming unit’s adjusted earnings before interest, taxes, depreciation and amortisation more than doubled from a year earlier to US$289 million, aided by lower content expenses.
WBD also made progress in its efforts to control costs, with expenses falling 5.5 per cent in the quarter ended Sep 30. That helped it report a surprise profit of five cents per share, while analysts had expected a loss of nine cents, according to data compiled by LSEG.
Revenue at the TV networks division, which includes Discovery Channel, Animal Planet and Food Network, rose 3 per cent to US$5.01 billion, driven by sublicensing of Olympic sports rights to regional broadcast networks throughout Europe.
Revenue at WBD’s studio segment fell 17 per cent, pulling total revenue of US$9.62 billion below estimates of US$9.80 billion.
With releases such as Beetlejuice Beetlejuice in the July-to-September quarter, Warner Bros Discovery’s studio division has struggled to repeat last year’s explosive success of Margot Robbie-starrer Barbie, the highest grossing film of 2023.
Trump spurs consolidation hopes
Like its rivals, WBD has been grappling with a decline in the cable TV business – a long-time profit engine – as more subscribers shift to streaming. The downturn has pressured companies to seek alternatives for the business.
Last week, Comcast said it was considering spinning off its cable networks that include CNBC into a separate company.
The industry needs to “meaningfully consolidate”, Zaslav said on Thursday, adding that the upcoming administration change with Donald Trump winning the US presidential election could “bring a pace of change and opportunity for consolidation”.
Strict antitrust policies under the Biden administration have weighed on deal-making across industries over the past few years. REUTERS
