Warner Bros Discovery surprised the market with a second-quarter profit, showcasing the strength of its international HBO Max rollout and the success of major film releases. The company reported a notable increase in subscriber numbers, buoyed by the global expansion of its streaming services and the popularity of titles such as “A Minecraft Movie,” which has taken the U.S. box office by storm.
Despite this positive news, shares of Warner Bros Discovery fell approximately 7 percent. This decline was largely attributed to a 9 percent drop in revenue from its cable TV unit, reflecting ongoing challenges in retaining domestic subscribers. As the company undergoes a restructuring process to create a more studio-centric Warner Bros and a cable-focused Discovery Global, it is intensifying its efforts to expand its streaming presence worldwide, particularly through the Warner Bros and DC franchises.
The streaming division, which includes Discovery+, added an impressive 3.4 million subscribers globally, surpassing Visible Alpha’s expectations of 2.71 million new additions. This growth was significantly driven by the service’s recent launch in Australia.
In terms of box office performance, “A Minecraft Movie” has grossed nearly US billion globally, while the film “Sinners,” featuring Michael B. Jordan, has exceeded US0 million in worldwide earnings. The strong lineup of releases contributed to a remarkable 55 percent growth in the studio segment, pushing total revenue for the quarter to US.81 billion, which exceeded analyst expectations of US.76 billion, according to data from LSEG.
Lagging TV business concerns investors
However, the linear network division, which includes CNN and TNT Sports, reported a 12 percent decline in advertising revenue, reflecting a weakening demand as viewers continue to shift towards streaming platforms. Investors are expressing concerns that the studio’s recent successes and subscriber growth may be short-lived, viewing them as “mere box-office cameos.” The ongoing struggles of the linear-TV business and the anticipated increase in spending on sequels remain central issues for stakeholders, as noted by Michael Ashley Schulman of Running Point Capital Advisors.
Looking ahead, Warner Bros Discovery anticipates that advertising revenue for its TV unit will decline at an even steeper rate in the current quarter, influenced by a lighter sports schedule and the absence of last year’s U.S. election coverage that had benefitted CNN.
On a positive note, the streaming unit reported an adjusted core profit of US3 million, a significant turnaround from a loss of US7 million in the same quarter last year. Overall, Warner Bros Discovery posted a quarterly profit of 63 cents per share, contrasting sharply with expectations of a loss of 21 cents.
“With high debt levels and ongoing challenges in traditional TV, some investors might be cautious and would like a wow factor to get them excited,” remarked Adam Sarhan, chief executive of 50 Park Investments.
Reporting by Harshita Mary Varghese in Bengaluru; Editing by Arun Koyyur and Tasim Zahid
