Warner Bros Discovery (NASDAQ:WBD) has reported a mixed financial performance in the latest quarter. The box office success of “Barbie” has bolstered profits, exceeding estimates. However, the lingering effects of two Hollywood strikes and a sluggish advertising market are anticipated to cast a shadow on earnings through 2024, according to company executives.
While the film and television writers’ strike was resolved in September, the SAG-AFTRA actors union strike, ongoing since July, continues to disrupt the industry’s 2024 film schedule and limit new content availability for media companies.
Chief Financial Officer Gunnar Wiedenfels expressed concerns about the prolonged financial impact of the strike, emphasizing the uncertainty surrounding a resolution. He stated, “Much like 2023, 2024 will likely present challenges, particularly in light of persistently sluggish advertising trends.”
Chief Executive David Zaslav noted a decline in original content production, resulting in a decrease in third-quarter streaming subscribers. The integration of WarnerMedia and Discovery led to a third-quarter adjusted core earnings of $2.97 billion, surpassing estimates. Overall revenue of $9.98 billion aligned with projections.
The company’s prudent management of production expenses during the strikes led to a notable increase in free cash flow, reaching $2.06 billion, exceeding expectations. This puts Warner Bros Discovery on track to significantly exceed $5 billion in free cash flow for the year, contributing to the company’s impressive $12 billion debt reduction to date.
Despite the blockbuster success of “Barbie,” the company reported a net loss of $417 million in the quarter, a marked improvement from the previous year. Great Hill Capital Chairman Thomas Hayes highlighted investor concerns about this financial outcome.
The networks segment experienced a 12% decline in advertising revenue, reaching $1.71 billion, attributed to global conflicts and inflation-induced uncertainty among marketers.
In contrast, the streaming unit showed a positive performance, achieving an adjusted core profit of $111 million, a substantial improvement from the $634 million loss in the previous year. The global average revenue per user in this segment saw a 6% increase.
The global direct-to-consumer customer base slightly decreased from 95.8 million to 95.1 million by the end of the quarter. In May, the company introduced the Max streaming service, combining HBO Max’s scripted content with Discovery’s reality programming