Warner Bros. Discovery had a mixed first quarter with beats on streaming subs and profit and an anticipated drop in revenue at the film studio, which has since turned around dramatically in Q2.
Global linear advertising sales dipped 11% with ongoing domestic audience declines offset in part by better trends in sports and international. Streaming ad revenue jumped 35% driven by an increase in ad-lite subscribers.
The company ended March with 122.3 million global streaming subscribers, an increase of 5.3 million globally vs Q4 as it rolls out into new markets, recently launching in Australia and Turkey among more than a dozen planned by year end for a presence in over 85 markets globally. Launches in the U.K. and Ireland, Italy and Germany are planned in early 2026.
Streaming posted $339 million profit with Max/HBO on a roll led by Mike White’s The White Lotus, medical drama The Pitt, and video game-based megahit The Last Of Us. Up next, The Gilded Age, Peacemaker, And Just Like That.
In a letter to shareholders, CEO David Zaslav said Max delivering one of television’s few “lean-in, appointment-viewing experiences” in the third season of The White Lotus. “Each episode helped shape our cultural zeitgeist, while echoing loudly across global social media.” The season so far has averaged more than 25 million global viewers per episode, pacing more than 40 percent ahead of season two.
With The Pitt, he said, “Max seized a unique opportunity to break into a new category by delivering an elevated, efficiently produced, episodic medical drama.” That’s averaged over 12 million viewers worldwide across each of its 15 episodes with a second season set to start filming. Based on strong audience response, he said, Max is in active development to produce other “elevated procedural dramas.”
The anticipated new Harry Potter series is entering production and scheduled to debut by early 2027.
Content revenues fell on lower theatrical amid an overall tepid box office and with Warner’s softer slate up Dune: Part Two and Godzilla x Kong: The New Empire in Q1 of 2024, and robust home entertainment revenue from Wonka and Aquaman and the Lost Kingdom. Studio profit rose, however, on lower costs including for games — a hit or miss business for Warner that didn’t have a new releases in the quarter.
Warner’s film biz has since turned around with A Minecraft Movie and Sinners. Superman arrives in July with a full on marketing blitz starting soon.
AT the TV studio, WBDTV launched two instant hits, secured four new third-party series orders, earned nine series renewals, and greenlit three new animation titles. Four new scripted series are set to launch later this year.
Total revenues of about $9 billion fell 10%. WBD’s net loss of about $500 million includes $1.6 billion of pre-tax acquisition-related amortization of intangibles, content fair value step-up, and restructuring expenses.
Across the company’s three divisions: Streaming operating income jumped to $339 million from $86 millio revenue up 9% to $2.6 billion. Studio profit surged 63% to $259 million on revenue off 16% at $2.3 billion. Global linear networks saw operating profit fall 14% to $1.8 billion with revenue down 6% to $4.8 billion.
WBD has been reinvesting a portion of the anticipated savings from its NBA package into additional domestic sports rights. The French Open and NASCAR debuting on TNT Sports in the second quarter will lead to incremental sports rights costs and production expenses for the three months ending in June.
On the broader, tariff-challenged macroeconomic climate, Zaslav said: “While we have yet to see any material impact over the last month, numerous aspects of our business, most particularly advertising, are sensitive to overall macroeconomic conditions. Significant inflation or other factors that negatively influence consumer sentiment and expenditure could have material impacts. In the past, we have effectively managed our business through periods of uncertainty, economic turbulence, and even recession, such as the COVID pandemic. As in those cases, we have again acted swiftly, though prudently, to control costs and are preparing for all ranges of scenarios over the months to come, while continuing to invest for future growth.”
The company has also started offering financial data as two (as well as three) operating divisions — Global Linear Networks and Streaming & Studios, a move tol improve “strategic optionality and flexibility to pursue potential opportunities as they arise.”
“As we have noted in the past, we believe the existing ecosystem, including content producers and both networks and streaming distribution platforms, will undergo significant change.” That will start with Comcast split in two by the end of the year, creating a new standalone cable networks business, Versant. WBD appears to be moving towards a similar situation.
WBD shares are off about 2% in early trading. Zaslav is hosting a call at 8:30 ET.
