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In a recent quarterly report, Warner Bros. Discovery faced a significant decline in its shares as it reported disappointing figures in advertising revenue, a larger-than-expected loss, and underwhelming streaming subscriber numbers. These results have raised concerns about the media giant’s future prospects.
The Loss
For the quarter ending on September 30, the company reported a loss of 17 cents per share, far exceeding the 6 cents per share expected by analysts. Despite a reported revenue of $9.98 billion, meeting the analyst’s expectations, the company’s shares still suffered a sharp decline.
The net loss for the third quarter amounted to $417 million, which translates to 17 cents per share. This loss was, however, a notable improvement from the previous year’s figure, which stood at $2.31 billion, or 95 cents per share. While Warner Bros. Discovery’s losses have decreased, it is still grappling with significant financial challenges.
Here’s why Warner Bros. Discovery stock is down
A Challenging Situation
The decline in Warner Bros. Discovery’s stock came on the heels of a media rally that took place the previous week, driven by the successful earnings reports of companies such as Roku and Paramount. The upcoming earnings report from rival media giant Disney added to the uncertainty in the market.
Warner Bros. Discovery’s leadership acknowledged the challenges they are facing, including sluggish ad revenue and ongoing disruptions caused by the actors’ strike. David Zaslav, the company’s CEO, described the current landscape as a “generational disruption,” particularly challenging for a streaming service that is operating at a substantial loss. The CEO pointed out the difficulties of navigating this terrain amidst low interest rates and the challenges posed by the advertising marketplace.
One of the key issues highlighted in the report was a 12% decrease in ad revenue within the networks segment compared to the previous year. This drop was attributed to declining viewership of general entertainment and news programs, as well as soft advertising trends in the U.S.
The Current Quarter
This quarter marked the first full quarter since Warner Bros. Discovery launched its flagship streaming service, Max, in May. Max combines content from HBO Max and Discovery+. Despite high expectations, the company reported 95.1 million global direct-to-consumer subscribers, which was 700,000 less than the previous quarter and lower than the analyst projection of 95.4 million subscribers. The company attributed this “modest sequential loss” to a lack of content offerings during the quarter.
One positive note in the report was that the streaming business managed to swing to a profit during the quarter. Additionally, Warner Bros. Discovery made progress in reducing its debt load, with $2.4 billion in repayments made during the quarter. However, the company still carries a substantial gross debt of $45.3 billion, raising concerns about its long-term financial stability.
