Warner Bros Discovery lost more than $1bn in the first quarter, underscoring the heavy costs Hollywood giants are enduring as they pivot their businesses towards streaming to offset shrinking audiences for traditional television.
The company behind HBO, the Warner Bros movie studio and CNN has been in the midst of a bruising restructuring over the past year as it sought to slash costs following the $40bn merger of Warner with Discovery last year.
Warner on Friday told investors that it expected to make a profit from its streaming business in 2023 — a year ahead of schedule — and that its streaming unit turned its first-ever operating profit in the quarter.
However, Warner also revealed a $1.1bn net loss across the company as underlying revenues fell 5 per cent to $10.7bn, weighed by weakness in its cable television business. The news comes a day after rival media group Paramount reported a $1.1bn net loss, sending its stock down nearly 30 per cent on Thursday.
The world’s largest traditional entertainment companies, such as Warner, Disney and Paramount, have been in the midst of an expensive push into online streaming. Over the past year investors have soured on the heavy costs of the transition, refocusing on profit rather than subscriber gains.
“Our US streaming business is no longer a bleeder”, said chief executive David Zaslav on the company’s earnings call, who added that “the environment is challenged, challenged, challenged”.
Chief financial officer Gunnar Wiedenfels said that the last year had “felt like three”.
Shares in WBD were down 2 per cent on Friday, paring back earlier losses. The company’s stock has gained nearly 30 per cent so far this year, as investors deem the worst of the restructuring to be over.
Zaslav has tried to be more disciplined with budgets following an era of extravagant spending for Hollywood, which had been boosted by years of ultra-low interest rates and a stock market rally. Warner and Disney have laid off thousands of workers as they try to cut their expenses.
Warner said it added 1.6mn streaming subscribers in the quarter, reaching 97.6mn customers globally as its direct-to-consumer business made an operating profit of $50mn.
The company had $49.5bn in gross debt at the end of March.