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Warner Bros. Discovery on Thursday announced a strong first-quarter showing for its streaming unit, even as its studios’ division underperformed.
The direct-to-consumer (DTC) unit — which includes streaming services like Max and premium television like HBO — turned a first-quarter profit of $86 million for the January to March quarter, compared to $50 million last year. In 2023, the New York-based entertainment giant became the first company to make streaming profitable over the course of a full year.
During the first quarter of 2024, Warner Bros. Discovery said it added 2 million DTC subscribers, bringing its total to 99.6 million.
“We continue to make bold moves to transform our company for the future as we position ourselves to take full advantage of the opportunities ahead,” CEO David Zaslav said in a statement after touting the success of Max and its upcoming “strongest ever” lineup of content. Warner Bros. Discovery on Wednesday announced a new streaming bundle with the Walt Disney Co. that will come this summer and include Disney+, Hulu, and Max.
Despite its success in streaming, Warner Bros. Discovery reported a 7% year-over-year drop in revenue to $9.96 billion, below analyst expectations of $10.2 billion. It also reported a net loss attributable to the company of 40 cents per share, compared to a loss of 24 cents per share.
Plus, the company’s studios division — which includes video games, movies, and television shows — posted $2.82 billion in revenue, a 13% drop compared to the same time in 2023. Games revenue was “significantly” lowered due to the success of last year’s Hollywood Legacy and the lack of cash generated by Suicide Squad: Kill the Justice League.
On the Hollywood side of things, theatrical revenue increased, driven by the popularity of Dune: Part Two and some films released in the last quarter of 2023. Home entertainment benefited from Wonka and Aquaman and the Lost Kingdom, the company noted.
During an earnings call Thursday, Zaslav promised to make more efforts to take advantage of its existing intellectual property like the Harry Potter franchise. He also announced that script development on a new Lord of the Rings movie was starting Thursday.
Television revenue was hit hard, with Warner Bros. Discovery pinning the blame on production delays stemming from last year’s Hollywood writer and actor strikes, which it says led to fewer episodes delivered between January and March.
The company’s free cash flow increased to $390 million last quarter, an improvement of $1.3 billion compared to the same time in 2023. Warner Bros. Discovery has been trying to lower its debt — currently $43.2 billion — that was largely accumulated from the 2022 merger between Discovery and Warner Bros. On Thursday, it said that $1.1 billion of debt was repaid during the quarter and announced a $1.75 billion cash tender offer.
Zaslav has directed staff to find opportunities for cost-cutting to help the company hit its financial targets, Bloomberg News reported Wednesday. Bloomberg, citing people with knowledge of the matter, reports that more than 2,000 workers have been laid off over the past year.
Warner Bros. Discovery stock dropped 4% on Thursday in pre-market trading.