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Warner Bros. Discovery ended March with 97.6 million global streaming subscribers, compared with around 96.0 million as of the end of 2022, the entertainment conglomerate disclosed in its first-quarter earnings report on Friday. Importantly, its streaming unit swung to a $50 million profit, compared with a loss of $654 in the year-ago period and a $217 million loss in the fourth quarter. Wall Street will take note of that streaming success as a sign of continued progress toward management’s vow to make the business sustainably profitable and of delivering on its promise to not chase subscribers at all costs.
“We feel great about the trajectory we are on,” said Warner Bros. Discovery CEO David Zaslav about becoming the first Hollywood giant to post a profitable quarter for its streaming division since entertainment CEOs set their sights on getting their direct-to-consumer operations to making a profit. “In fact, we now expect our U.S. direct-to-consumer business to be profitable for 2023 – a year ahead of our guidance.”
Wells Fargo analyst Steven Cahall had in his earnings preview forecast a streaming loss of $76 million, “though we expect losses to step up to $344 million in the second quarter on higher selling, general and administrative (expenses) associated with the Max relaunch.”
Warner Bros. Discovery on Friday reported quarterly revenue roughly in line with analysts’ expectations, while earnings fell below estimates. However, stripping out expenses related to the merger of Discovery and AT&T’s WarnerMedia, which created the sector powerhouse, the company would have beaten consensus earnings estimates.
Growing free cash flow, a profitability metric that shows how much money a company has left over after meeting its financial obligations, has been a key focus of Zaslav’s team. However, for the first quarter, Warner Bros. Discovery on Friday reported negative free cash flow due to interest and sports rights payments.
Various Wall Street analysts have turned bullish on Warner Bros. Discovery this year amid management’s focus on free cash flow, debt reduction and streaming profitability.
The company unveiled in mid-April that it would combine its HBO Max and Discovery+ streaming services into the rebranded Max, set to launch in the U.S. on May 23. Its goal is to make Max the streaming destination for everyone in a household, with the new tagline “The One to Watch.” Max will offer the company’s library product and new intellectual property, but also double down on beloved franchises with the likes of a live-action Harry Potter scripted television series and new installments of The Big Bang Theory and Game of Thrones.
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