Warner Bros Discovery loss bigger than expected as Hollywood strikes dent content pipeline

Warner Bros Discovery (WBD.O) reported a bigger-than-expected quarterly loss on Friday, as the media conglomerate battled a weak advertising market and the fallout of the twin Hollywood strikes on content generation.

Shares of the company, forged by the union of WarnerMedia and Discovery, tumbled nearly 10 per cent before the bell, even as it beat Disney and Paramount to an inaugural annual profit for the streaming business.

The results highlight the challenges faced by Hollywood after the strikes by writers and actors paralyzed production for months before ending in September and November, respectively.

Warner Bros Discovery’s studio business revenue sank 17 per cent in the fourth quarter as it had little to follow the success of “Barbie”, which released in July and smashed box office numbers with more than $1 billion in ticket sales worldwide.

The company is pinning its hopes on the March release of the second installment of sci-fi epic “Dune,” featuring Timothee Chalamet and Zendaya. The release was delayed from November due to the Hollywood strikes.

Advertising revenue at its networks segment declined 12 per cent to $1.95 billion, hurt by the ongoing decline in audiences for traditional television and a weaker economic outlook.

That led to overall fourth-quarter revenue of $10.28 billion, which missed analysts’ average estimate of $10.35 billion, per LSEG data. Excluding items, the company lost 16 cents per share, larger than expectations for a loss of 7 cents.

The decline of cable TV has in part fueled the recent buzz in the industry about consolidation moves. Reuters reported in January, citing a source, Skydance Media CEO David Ellison was exploring an all-cash bid to acquire entertainment company Paramount Global’s parent, National Amusements.

That followed another Reuters report in December that Warner Bros Discovery CEO David Zaslav and Paramount top boss Bob Bakish had met to discuss a potential deal.

Meanwhile, Warner Bros Discovery’s streaming business extended its strong show. The unit had 97.7 million global customers at the end of the fourth quarter, including 1.3 million subscribers from its acquisition of BluTV.

For the full year, the streaming division reported a profit of $103 million, compared with a loss of $1.6 billion in 2022. For the reported quarter, it posted an adjusted core loss of $55 million.

Free cash flow came in at $3.31 billion for the quarter ended December, topping estimates of $2.6 billion, according to Visible Alpha, as lower spending on content and marketing helped lower costs by nearly 19 per cent to $10.47 billion.