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Warner Bros Discovery expects US DTC profit in 2023 after announcing Q1 results

Media conglomerate posts adjusted Ebitda of US$50m for streaming segment as global subs hit 97.6m.

9 May 2023 Ed Dixon

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  • WBD announces US$1.1bn loss for Q1 2023
  • Revenue down 5% YoY to US$10.7bn
  • US DTC profit in 2023 would be a year ahead of company guidance

Warner Bros Discovery (WBD) has announced a net loss of US$1.1 billion for the first quarter of 2023, though its streaming segment managed a profit of US$50 million.

The loss is tied to the merger between Warner Bros and Discovery last year, with WBD having posted a profit of US$456 million for Q1 2022.

Total revenue was down five per cent year-over-year (YoY) to US$10.7 billion, excluding the impact of broadcasting the 2022 Beijing Winter Olympics. Total adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) dropped 12 per cent to US$2.6 billion.

WBD’s direct-to-consumer (DTC) business posting adjusted Ebitda of US$50 million compares to a loss of US$227 million for the same period last year. Total DTC subscribers were 97.6 million, an increase of 1.6 million since the end of Q4 2022. Revenue was down one per cent to US$2.5 billion, with operating expenses decreasing 24 per cent to US$2.4 billion. The company now excepts its US DTC business to be profitable this year.

WBD’s networks segment saw revenue fall ten per cent YoY to US$5.6 billion. Advertising revenue dipped 14 per cent. This was primarily driven by audience declines in domestic general entertainment and news networks and soft advertising markets mainly in the US and, to a lesser extent, certain international markets. The decline was partially offset by higher domestic sports advertising driven by the National Collegiate Athletic Association (NCAA) March Madness tournament.

Content revenue decreased 51 per cent, largely due to the sublicensing of Olympic sports rights to European broadcast networks in 2022. Other revenue increased 96 per cent, courtesy predominantly of the services provided to the BT Sport joint venture.

“It is an important time for Warner Bros Discovery,” said David Zaslav (pictured above), president and chief executive of WBD.

“We’ve come through some major restructurings and have repositioned our businesses with greater precision and focus. And we see a number of positive proof points emerging, with DTC perhaps the most prominent. We made a meaningful turn this quarter with US$50 million in segment Ebitda and 1.6 million net adds, and we feel great about the trajectory we are on.

“In fact, we now expect our US DTC business to be profitable for 2023 – a year ahead of our guidance.

“Even in today’s challenging marketplace, we are positioned to drive free cash flow and deleverage our balance sheet, and we remain confident in our strategy and ability to achieve our financial targets.”

SportsPro says…

WBD’s upbeat forecast for its DTC operation comes a month after the launch of Max, the company’s new streaming service that combines the assets of HBO Max and Discovery+. The media giant is a much leaner operation in 2023 compared to a year ago after Zaslav slashed budgets and dropped unwieldy projects, such as CNN+.

The next 12 months will see more streamlining, with the imminent rollout of Max then being expanded globally later in the year, as well as the launch of the Turner Sports brand in the UK to replace BT Sport and Eurosport. What role live sports will play in Max is unclear but it will have to be defined as WBD positions itself for talks on the renewal of its domestic rights deal with the National Basketball Association (NBA) and the Paris 2024 Olympics.

It is also worth noting that the 24 per cent decrease in costs was the main reason for WBD’s DTC unit posting a profit in Q1. The media giant clearly feels this is sustainable with the projection for the US market to remain a positive on the balance sheet. Overseas is likely be a different story given the marketing push both Max and the Turner Sports’ launch in the UK will require.

While there is still more to discover about the media giant’s plans for sport, more than a year on from the merger Zaslav’s vision for WBD is now coming into focus.

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