Warner Bros Discovery reported a larger-than-expected quarterly loss, grappling with a weakened advertising market and the aftermath of Hollywood strikes impacting content generation. Despite securing an inaugural annual profit for the streaming business, the company’s shares plummeted by nearly 12%, outpacing declines in Disney and Paramount.
The setbacks were notably linked to the Hollywood strikes by writers and actors, paralyzing production until their resolution in September and November, respectively. Warner Bros Discovery’s studio business revenue saw a 17% decline in the fourth quarter, struggling to replicate the success of “Barbie,” which surpassed $1 billion in global ticket sales after its July release.
Hinging its hopes on the March release of the delayed second installment of the sci-fi epic “Dune,” starring Timothee Chalamet and Zendaya, Warner Bros Discovery seeks to recover from the strike-induced challenges. However, overall fourth-quarter revenue of $10.28 billion fell short of analysts’ estimates.
The decline in cable TV has fueled industry speculation about consolidation. Reports indicate Skydance Media CEO David Ellison exploring a bid for Paramount’s parent, National Amusements. Further reports suggest discussions between Warner Bros Discovery CEO David Zaslav and Paramount’s top boss Bob Bakish regarding a potential deal.
Despite the market challenges, the streaming business demonstrated resilience, ending the year with 97.7 million global customers. The full-year profit for the streaming division amounted to $103 million, a significant turnaround from the $1.6 billion loss in 2022. Finance chief Gunnar Wiedenfels anticipates the streaming business to be modestly negative in the first half but profitable again in the second half.
Notably, Warner Bros Discovery recently announced a joint venture with Walt Disney and Fox to launch a sports streaming service in the fall, targeting younger audiences disengaged from traditional television. The company also reported positive free cash flow of $3.31 billion for the quarter, surpassing estimates as costs decreased by nearly 19% to $10.47 billion.