Shares of Warner Bros. Discovery Inc. fell in after-hours trading on Thursday after the media giant reported fourth-quarter results and a subscriber count that came in below expectations.
The company — the result of a merger last year between AT&T’s WarnerMedia and Discovery — reported a fourth-quarter net loss of $2.08 billion, or 86 cents a share, after a profit of $38 million, or 8 cents a share, in the same quarter in 2021.
Revenue for Warner Bros. Discovery — which oversees a number of TV channels and streaming platforms, including HBO, HBO Max, CNN, Discovery and Discovery+ — came in at $11 billion, compared with $3.19 billion in the prior-year quarter. Warner Bros. Discovery
WBD,
finished the quarter with 96.1 million subscribers.
On a GAAP basis, analysts polled by FactSet expected Warner Bros. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. They expected a subscriber count of around 96.33 million.
Shares slid 3.4% after hours.
Chief Executive David Zaslav, in a statement, said that “major restructuring decisions” were “behind us,” and that the company was now focused on expansion. He called out the success of the HBO series “The Last of Us,” plans for the company’s DC Studios and record sales of the game “Hogwarts Legacy.”
However, Warner Bros. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and a mess created from the merger deal itself. In an effort to shore up the bottom line, the company has cut jobs and content — including CNN+ and a “Batgirl” film set for HBO Max.
In a filing in December, Warner Bros. Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring charges. But it said that the ongoing reorganization, expected to be largely complete by the end of next year, “could result in additional impairments above the revised estimates.”
Ahead of the fourth-quarter earnings, some analysts said the results would present an opportunity for management to reframe the company’s path forward.
“More importantly, we believe 4Q is an opportunity for management to turn the page to 2023 and reset the narrative,” BofA analysts said in a note last month.
“2022 was mired by a combination of company specific merger related headwinds along with cyclical and secular pressures,” they continnued. “At this point, the majority of heavy lifting (related to restructuring charges etc.) has been completed, direct to consumer (DTC) losses peaked in ’22 with a path to breakeven in ’24 and the cyclical headwinds should abate as macro conditions improve.”
They added that advertising trends in January appeared to have improved from December.
The Wall Street Journal this month reported that Warner Bros. Discovery planned to keep Discovery+ a standalone streaming platform, as the company weighs how to make more of its content available in a single place. The Journal said that rather than fully combine Discovery+ and HBO Max as once planned, Warner will move ahead with a platform that “will feature HBO Max content and most Discovery+ content, with Discovery+ remaining available as a stand-alone option.”
Benchmark analyst Matthew Harrigan, in a note this month, said that decision was “not surprising given the likelihood of losing some price sensitive customers for whom shows like House of the Dragon or critically acclaimed new hit The Last of Us does not resonate, or at least not enough to pay a likely higher price than the present $15.99/$9.99 (with ads) for HBO Max.”
Shares of Warner Bros. Discovery have tumbled 45.2% over the past 12 months. By comparison, the S&P 500 index
SPX,
has fallen 5.8% over that period.
