Warner Bros. Discovery, the media conglomerate formed by the merger of WarnerMedia and Discovery in 2022, has fallen short of revenue and profit estimates for the fourth quarter of 2023. Despite this setback, the company experienced a surge in free cash flow, which has been a key focus for Chief Executive Officer David Zaslav.
Although Warner Bros. Discovery missed analyst targets for profit and revenue in the fourth quarter, its streaming service Max ended the year profitable for the first time. This achievement is significant as it puts Max ahead of its streaming rivals, including Disney, Comcast’s NBCUniversal, and Paramount Global, in reaching profitability. Zaslav’s efforts to cut content spending for Max have paid off, leading to improved financial performance.
The company’s flagship subscription streaming service reported 97.7 million global direct-to-consumer subscribers, representing a 2% increase from the previous quarter. This growth in subscribers demonstrates the continued popularity and success of the streaming platform.
In terms of financials, Warner Bros. Discovery generated $3.31 billion in free cash flow in the fourth quarter, marking an 86% increase from the previous year. This surge in free cash flow is a positive development, as Zaslav has made it a priority to boost free cash flow and reduce the company’s debt. The company paid down $1.2 billion of debt in the quarter and $5.4 billion in debt throughout 2023. Despite these efforts, Warner Bros. Discovery still has $44.2 billion of gross debt remaining.
However, there were some areas of concern in the company’s financial report. The fourth-quarter net loss was $400 million, or 16 cents per share, compared to a loss of $2.1 billion, or 86 cents per share, during the same period last year. Fourth-quarter adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was $2.5 billion, down 5% from the previous year, excluding the impact of foreign exchange. The decline in studio revenue, caused by strikes by the Writers Guild of America and the Screen Actors Guild – American Federation of Television and Radio Artists, contributed to this decrease in adjusted EBITDA.
Warner Bros. Discovery also reported a decline in linear television advertising revenue, excluding changes in foreign exchange, and a drop in distribution revenue. To combat the decline in cable TV subscriptions, the company plans to collaborate with Disney and Fox to offer a smaller, more affordable bundle of linear networks focused on sports programming.
Despite falling short of revenue and profit estimates, Warner Bros. Discovery’s surge in free cash flow and the profitability of its streaming service Max are encouraging signs for the company’s future. Zaslav’s efforts to prioritize financial stability and debt reduction have shown positive results. As the media landscape continues to evolve, Warner Bros. Discovery will need to adapt and find innovative ways to attract and retain subscribers while navigating challenges in the traditional television market.
