Warner Bros. Discovery posted a quarterly loss for its Direct-to-Consumer (DTC) unit, and saw its base of global streaming subscribers rise to 103.3 million at the end of the second quarter, up 3.6 million subs added, compared 99.6 million at the end of the first quarter.
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Warner Bros. Discovery posted a second-quarter loss of $107 million for its DTC unit, a swing from a first-quarter profit of $86 million. The DTC segment includes the studio’s streaming and premium pay-TV services and saw overall revenues fall 6 percent to $2.56 billion.
Studios revenue fell 5 percent to $2.44 billion, with adjusted EBITDA dropping 31 percent to $210 million. The Networks segment saw overall revenues fall 8 percent to $5.27 billion, as advertising revenues fell 10 percent to $2.2 billion, while distribution revenues was off 9 percent to $2.67 billion.
WBD’s first-quarter total revenue fell 5 percent to $9.7 billion. The media conglomerate posted a quarterly loss of $9.98 billion, which came after a $9.1 billion non-cash goodwill impairment charges related to the networks segment, and especially legacy linear TV assets amid “continued softness” in the advertising market.
”While I’m certainly not dismissive of the magnitude of this impairment, I believe it’s equally important to recognize that the flip side of this reflects the value shift across business models and our conviction and confidence in this growth and value opportunity,” Warner Bros. Discovery CFO Gunnar Wiedenfels told analysts during an after-market call as he added the steep impairment charges reflected a “transformation period that we’re working through.”
WBD also recorded a $2.1 billion pre-tax acquisition-related amortization of intangibles, a content fair value increase and restructuring charges. Adjusted EBITDA, another profitability metric, came to $1.79 billion.
The studio in commentary accompanying its latest financial results said the goodwill impairment represented the difference between market capitalization and the company’s book value, “continued softness in the U.S. linear advertising market” and “uncertainty” around sports right renewals, especially for NBA games.
CEO David Zaslav on the analyst call pointed to recent gains on the streaming TV front, even as traditional linear TV channels struggled on the distribution front. “We’re still in the midst of a long term transition, marked by many notable progress points, as well as some tough challenges. A direct-to-consumer business is doing very, very well, and we see a tremendous amount of upside. At the same time, there are tough conditions in the legacy business,” he argued.
Back on the streaming front, with Netflix profitable and being seen by some observers as the streaming market leader, Wall Street has been looking for Hollywood conglomerates to make their streaming business units profitable after earlier efforts to grow subscriber bases.
WBD execs also talked about a planned global rollout of Max and its content after launches in Europe and Latin America. “We do have a lot of active conversations with additional partners that will help us scale and help us localize and get more local content into these offerings as we roll out,” JB Perrette, CEO and president of global streaming and games for WBD, told analysts.
Perrette added the worldwide penetration of Max, which he is spearheading, will be well underway by the first half of 2026.
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Zaslav addressed ongoing streaming bundle partnerships with rival studios, including a sports streaming pact with Disney and Fox, to better serve cost-conscious consumers. “We’ve been big proponents of bundling, given the benefits it can provide on lowering the cost of entry for consumers, reducing churn and having an overall more positive consumer experience,” he told investors.
The WBD boss pointed to Venu Sports, the joint venture sports streamer from Disney, Fox and Warner Bros. Discovery, set to launch in the fall and priced at $42.99 per month. “This service will be available at a compelling price point that we’re confident will appeal to the cord cutter and cord never fans not currently served by existing pay TV packages,” Zaslav said.
The goal is WBD working with rival studios to squeeze profitability out of their direct-to-consumer platforms in the face of competition against market leaders Netflix and Amazon Prime Video. That talk of strategic options for WBD follows a recent Bank of America proposal to break up the major conglomerate.
That’s led to questions of the Hollywood studio selling off legacy assets, or splitting streaming and movies, persisting on Wall Street, and with investors impatient to see the benefits of WBD’s current leadership looking to make money from streaming, movies and legacy linear TV assets over the long haul.
“We have been operating under the one Warner Bros. Discovery strategy for the past two and a half years, and every day I’m seeing evidence everywhere in the business the benefits of those strategies,” CFO Wiedenfels said in response to a question about possibly splitting WBD’s movie and streaming businesses to boost shareholder value.
“We have to look at and consider all options, but the number one priority is to run this company as effectively as possible,” Zaslav added as he echoed Wiedenfels in urging patience on the part of investors as the ongoing turnaround of the Hollywood studio — including its combined streaming, legacy TV and Warner Bros. movie businesses — continues.
Perrette on the analyst call also downplayed market speculation that the studio’s games division might be put on the auction block, telling analysts: “We still see this as a huge opportunity for us.” Zaslav added as he pointed to movie franchises being tied to the gaming space: “We need to get bigger, and the IP that we own and the value that it has in the gaming space is something we’re looking to take advantage of.”
WBD execs would not be drawn during the analyst call on WBD and TNT Sports filing a law suit against the NBA over the league’s decision to sell a package of rights to Amazon Prime Video and rejecting a matching third-party offer.
“We’re in litigation. At this point, we’ve handed it off to our lawyers. We have confidence in our position,” Zaslav said at one point after largely rebuffing a number of questions around the NBA lawsuit during the analyst call. WBD had matching rights in its prior NBA contract, and the media company argued that gives it the right to match either NBC’s or Amazon’s deals. WBD had sought to match the Amazon deal.
Stock in the media conglomerate fell by 65 cents, or 8.5 percent, to $7.06 in after-hours trading as investors digested the latest financial results.
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