Warner Bros Discovery (WBD.O) disclosed a larger-than-anticipated quarterly loss on Friday, as the media conglomerate grappled with a feeble advertising market and the repercussions of the twin Hollywood strikes on content production.
Shares of the company, formed by the merger of WarnerMedia and Discovery, plummeted by almost 12%, despite outperforming Disney and Paramount to achieve an initial yearly profit for the streaming sector. Paramount’s shares (PARA.O) also declined by over 5%.
The outcomes underscore the obstacles following the strikes by writers and actors, which halted production for months before concluding in September and November respectively.
Warner Bros Discovery observed a 17% decline in studio business revenue during the fourth quarter, struggling to replicate the success of “Barbie,” which premiered in July and grossed over $1 billion in global ticket sales.
The company is banking on the release of the second instalment of the sci-fi saga “Dune,” starring Timothee Chalamet and Zendaya, scheduled for March. This release was postponed from November due to the Hollywood strikes.
Advertising revenue within its networks segment plunged by 12% to $1.95 billion, impacted by the continual decline in traditional television viewership and a subdued economic forecast.
Despite fourth-quarter revenue reaching $10.28 billion, it fell short of analysts’ average projection of $10.35 billion, according to LSEG data.
Adjusted for items, the company incurred a loss of 16 cents per share, surpassing the anticipated loss of 7 cents.
The dwindling relevance of cable TV has spurred discussions about fresh consolidation in the industry.
In January, Reuters reported, citing a source, that Skydance Media CEO David Ellison was contemplating a bid for Paramount’s parent company, National Amusements.
This came after a December Reuters report revealed discussions between Warner Bros Discovery CEO David Zaslav and Paramount’s top executive Bob Bakish regarding a potential deal.
Earlier this month, Warner Bros Discovery announced plans to establish a joint venture with Walt Disney (DIS.N) and Fox (FOXA.O) to introduce a sports streaming service in the autumn, targeting younger viewers disengaged from traditional television.
Meanwhile, the streaming business continued to perform strongly, boasting 97.7 million global subscribers by the fourth quarter’s end, including 1.3 million from its acquisition of BluTV.
The streaming division reported a profit of $103 million for the full year, a significant turnaround from the $1.6 billion loss in 2022.
Chief Financial Officer Gunnar Wiedenfels projected core earnings for the business to be “modestly negative in the first half and then profitable again in the second half” during a post-earnings call.
Free cash flow for the quarter stood at $3.31 billion, surpassing estimates of $2.6 billion, as costs decreased by nearly 19% to $10.47 billion, as reported by Visible Alpha.