by Venus Sanders
Warner Bros. Discovery, the media conglomerate behind CNN, HBO, and Warner Bros Studio, has reported disappointing second-quarter revenue, falling short of Wall Street's estimates. The company's high-profile box office disappointments, including "The Flash," and a decline in streaming subscribers contributed to the underwhelming financial results.
"The Flash," starring troubled actor Ezra Miller, underperformed at the box office, impacting revenue (unpopular opinion: I thought the movie was pretty good). Additionally, increased marketing costs for the blockbuster movie "Barbie" further hampered financial performance.
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The streaming division, which includes Max and Discovery+, also faced challenges, losing nearly 2 million subscribers during the quarter. The company attributed the decline in subscribers partly to overlapping bases between Max and Discovery+, as some users had paid for both services. Migration of HBO Max subscribers to the new service Max, which includes Discovery+ and HBO Max content, led to some churn or canceled subscriptions.
However, despite the loss in subscribers, streaming revenue managed to grow by 13% to $2.73 billion, driven by increases in streaming subscription fees.
Warner Bros. Discovery CEO, David Zaslav, acknowledged the expected subscriber disruption due to the migration but expressed confidence in the company's streaming business becoming profitable in the US this year.
The company's second-quarter loss narrowed to $1.24 billion, attributed to a 16% reduction in total costs and expenses.
Despite the positive financial moves, the advertising climate remains challenging, and the company expects global networks' advertising revenue to decline in the "high single-digit range" during the second half of the year.
Warner Bros. Discovery's flagship news network, CNN, has faced declining ratings after a tumultuous period under controversial network boss Chris Licht, who was ousted in June.
Despite the challenges, the company has made significant efforts to restructure its business and reduce debt. It repaid $1.6 billion in debt during the quarter related to its 2022 merger of Warner Bros. and Discovery and announced a tender offer aimed at paying down up to $2.7 billion more.
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Warner Bros. Discovery ended the second quarter with $47.8 billion in debt and $3.1 billion in cash on hand. CEO David Zaslav expressed confidence in the team's efforts to restructure the business for the future and emphasized the importance of de-levering as a key element in the company's turnaround.