Warner Bros. Discovery Q4 Hit By Soft Advertising, Strike Impact; “We Have An Attack Plan For 2024” – David Zaslav

Jill Goldsmith
·3 min read

Warner Bros. Discovery saw revenue dip but losses narrow in the last quarter of 2023. Free cash flow grew — a key metric that allows the David Zaslav-led media giant to continue chipping away at its hefty debt, which it is doing.

It ended the year with 97.7 global streaming subscribers — including 1.3 million from BluTV, the Turkish streamer it acquired in December. Streaming lost money for the quarter ($55 million) but did post a $103 million profit for the full year, a bit of a milestone but one that Wall Street shrugged off.

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Revenue of $10.3 billion compared with $11 billion the year before, down 7%. Revenue at the television studio was hit by the impact of the WGA and SAG-AFTRA strikes, with production still revving up.

Theatrical revenue was higher on more releases, including Aquaman And The Lost Kingdom but lower than anticipated even as analysts had been lowering their studio forecasts.

Ad sales at the network segment fell 14%, a glum number for a company heavily dependent on advertising.

Free cash flow rose to $3.31 billion, from $2.48 billion.

“After executing against our strategic plan to reposition the company, we are now on solid footing with a clear pathway to growth. We generated $6.2 billion in free cash flow and paid down $5.4 billion in debt in 2023, which puts us at 3.9x net leverage. We have an attack plan for 2024 that includes the roll-out of Max in key international markets, a more robust creative pipeline across our film and TV studios, and further progress against our long-range financial goals and are confident in our ability to drive sustained operating momentum and enhanced shareholder value,” said Zaslav.

The stock has been in the tank, malingering at about $9.50. It was up early trading ahead of the numbers but has now settled back in negative territory.

Zaslav and WBD execs will host a call at 8 ET to go over the numbers and take questions. It’s the first since WBD, Disney and Fox announced a sports streaming joint venture, which has already faces a legal challenge. And also the first since speculation heated up around a sale of Paramount Global, with Zaslav initially in the mix having had meetings with Shari Redstone and Bob Bakish.

Studios revenue fell 17% % to $3.17 billion. Content revenue was off 19% on significantly lower TV sals due primarily to the impact of the WGA and SAG-AFTRA strikes and certain large licensing deals in the prior year. Theatrical revenue increased due to the larger release slate in the current year quarter (Wonka, Aquaman and the Lost Kingdom,
and The Color Purple).

It gave a shoutout to games revenue, which increased meaningfully on fHogwarts Legacy, including a Q4 launch on the Nintendo Switch.

Studios operating expenses fell 15%.

SG&A expenses increased 38% ex-FX, primarily driven by higher theatrical marketing expense due to the larger release slate.

Studios adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) fell 30%.

At networks, revenues fell 8% to just over $5 billion, hit in part by WBD’s exiting the AT&T SportsNet regional sports networks business. Distribution revenue dipped 3% primarily driven by declines in U.S. pay-TV subscribers.

Advertising revenue dropped 14% on audience declines in domestic general entertainment and news networks, and soft linear advertising markets in the U.S. and some international markets.

Content revenue fell 16% on lower international sports sublicensing.

WBD said it added 500k DTC subscribers from the third quarter, excluding BluTV and TNT Sports Chile.

Streaming revenue nosed higher, up 3% to pass $2.5 billion. Losses narrowed to $55 million from $217 million the year before. Distribution revenue was up 4%. Content revenue fell 30%.

Ad sales jumped 51% driven by higher U.S. Max engagement and ad-lite subscriber growth.

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