Warner Bros. Discovery’s
fourth-quarter subscriber count beat Wall Street estimates but the stock was falling as the media company’s loss in the period was wider than analysts’ forecasts and revenue came up short.
Shares were falling 12% to $8.43 on Friday. If they closed there it would be the stock’s lowest close since March 31, 2009, according to Dow Jones Market Data. The stock, which was the worst performer in the
S&P 500
and
Nasdaq 100
Friday, has fallen 46% over the last 12 months.
Other streaming stocks were falling Friday.
Paramount Global
was down 5.9%,
Walt Disney
was dropping 1.5%, and
Netflix
was off 0.4%.
Warner Bros.
reported fourth-quarter direct-to-consumer subscribers of 97.7 million, above analysts’ estimates of 95.6 million, according to FactSet. The beat came after subscriber numbers fell sequentially in both the second and third quarters as a variety of streaming services, including
Netflix,
Disney
+, and
Paramount
+, battled for market share.
The company reported a fourth-quarter loss of 16 cents a share on revenue of $10.28 billion. Analysts surveyed by FactSet expected the company responsible for the Barbie movie and owner of the Max streaming service to post a loss of 8 cents a share from revenue of $10.34 billion. In the same period last year, Warner Bros. lost 86 cents a share on revenue of $11 billion.
Advertising revenue in the networks segment decreased 14% to $1.95 billion, primarily driven by audience declines. Revenue from the studios segment dropped 18% to $3.17 billion from the previous year. During the company’s conference call, Chief Financial Officer Gunnar Wiedenfels said that strikes by writers and actors halted production and delivery of TV content during the quarter.
On top of financials missing Wall Street expectations in the quarter, Warner Bros. said on its conference call it has concerns about its game releases for the current year, which could negatively impact studio revenue.
“This year, Suicide Squad, one of our key videogame releases in 2024, has fallen short of our expectations since its release earlier in the quarter, setting our games business up for a tough year-over-year comp in Q1,” Wiedenfels said. This comes after the success of Hogwarts Legacy, which launched last year but became available on the
Nintendo
Switch in the fourth quarter.
TD Cowen analyst Doug Creutz said he was upbeat for the short term but skeptical about the outlook, writing in a note late last month that he believed Warner Bros. direct-to-consumer business had achieved “modest profitability” in 2023.
Warner Bros. reported a profit of $103 million for its direct-to-consumer business for the year. The company also ended 2023 with $6.16 billion in free cash flow, an 86% increase from 2022. Warner Bros., which has been working toward paying off debt, paid down $5.4 billion in debt in the year and ended 2023 with $44.2 billion of debt remaining.
“We think visibility on significant longer-term profitability remains low, with subscriber growth likely to continue slowing and further price increases likely having increasingly negative impacts on churn given cuts in content spending,” Creutz wrote. “Ultimately, we think the only way the industry returns to real health is to give up on the standalone DTC product dream and figure out a way to rebundle everyone’s content together.”
Plans by Warner Bros., Disney subsidiary ESPN, and Fox for a joint sports-streaming platform would represent a step away from standalone direct-to-consumer streaming. But that venture, disclosed this month, is facing an antitrust lawsuit filed by competitor
FuboTV.
Write to Angela Palumbo at [email protected]
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