Warner Bros., one of the biggest movie studios in the world, has seen lackluster revenue recently, with their biggest films not performing as well as they’d hoped. In order to boost their bottom line, the company has announced plans to launch a new streaming service that will allow customers to stream the studio’s most popular movies and TV shows on demand. The company plans to introduce the streaming service in 2018, before any other competition arrives, and it hopes to use the timing to get ahead of the game before Netflix begins licensing Warner Bros. content next year.
Warner Brothers Discovery
On Thursday, it released its third quarter profits, which fell short of analyst estimates as a result of a challenging advertising climate and expenditures related to its post-merger reorganisation.
Additionally, HBO Max and Discovery+, the company’s integrated streaming services, will launch in the spring rather than the originally stated summer, according to CEO David Zaslav.
According to Refinitiv, the following is how the company’s report fared in comparison to analysts’ predictions:
Revenue: $9.82 billion vs the anticipated $10.36 billion
The firm posted a 95 cent loss per share, blaming macroeconomic challenges, especially in the advertising industry.
After falling 5.6% to $11.97 during the normal trading session, shares dropped more than 5% after hours on Thursday.
The merger of AT&T’s WarnerMedia and Discovery, which was finalised earlier this year, produced Warner Bros. Discovery. Since the transaction was completed, the business has been implementing severe cost-cutting measures, such firing employees and removing material from HBO Max.
Zaslav stated in the business announcement on Thursday that “we have great belief in the opportunities ahead, even if there is still more work to be done and some painful decisions to be made.”
“In fact, we see this as a tremendous opportunity, one we grasped totally to go inside each of our companies and evaluate what’s working, what’s not working, is it organised properly, and does it have the necessary resources,” he continued in a later statement during an earnings conference call.
As in the previous year, Warner Bros. The value of Discovery has been almost exactly halved as a result of Wall Street’s reduced projections for the growth of streaming subscribers worldwide. The industry giant Netflix lost users earlier this year and introduced an ad-supported tier at a lower price as streaming competitors compete for subscribers.
On the earnings call on Thursday, Zaslav stated, “I believe that the grand experiment of chasing subscribers at any cost is over.” He added that the company’s focus will be on generating $1 billion in earnings before interest, taxes, depreciation, and amortisation from its streaming business by 2025.
HBO Max’s management also pointed out that since its introduction over three years ago, it hasn’t raised the cost of a membership, placing it in a strong position to do so when it relaunches as a platform that combines Discovery+ and other content.
According to Zaslav, the business is “aggressively targeting” the industry and “moving swiftly” with its ambitions to establish a free, ad-supported streaming service. Streaming services with advertising, including Fox’s Tubi and Paramount Global’s Pluto TV, have witnessed a large increase in subscribers and advertising income.
In the third quarter, the business attracted 2.8 million new direct-to-consumer streaming users, increasing its total to 94.9 million worldwide. The direct-to-consumer segment’s revenue fell 6% to $2.3 billion as a result of declines in licencing and distribution income.
Revenue for the film studio division of Warner Bros. Discovery fell 5% to around $3.09 billion from the same time previous year, when Warner had more theatrical films.
The business predicted it would record between $1.3 billion and $1.6 billion in pre-tax restructuring costs during the third quarter in public disclosures made at the end of October. The restructuring is anticipated to be largely finished by the end of 2024 and will result in total pre-tax restructuring expenses ranging from $3.2 billion to $4.3 billion.
Meanwhile, media firms have been impacted by the downturn in advertising.
The TV networks division’s revenue fell 8% to $5.2 billion. A 11% decline in advertising income had a specific impact on the segment.
Advertising headwinds, according to Gunnar Wiedenfels, CFO of Warner Bros. Discovery, continued to have an impact on the business into the fourth quarter and remained the biggest unknown for the company’s performance in 2023.
On Wednesday, industry rival Paramount Global posted profits. It also missed analyst expectations due to declining TV and advertising income.