Warner Bros. Discovery returns to streaming growth

Warner Bros. Discovery returned to streaming subscriber growth in the fourth quarter, adding 500,000 customers excluding its acquisition of Turkey’s BluTV and TNT Sports Chile, which was previously treated as part of WBD’s networks division.

Source: Warner Bros Discovery

Overall, Warner Bros. Discovery ended the year with 97.7 million direct-to-consumer subscribers, including 1.3 million from the BluTV acquisition.

WBD also passed the milestone of posting positive adjusted EBITDA for streaming for the full year – of US$103 million – thanks to positive numbers in the first and third quarters.

The streaming growth in Q4 all came from international business, with international streaming subscribers rising by 2.3 million over the quarter (including BluTV and TNT Sports Chile) to end with 45.6 million, offsetting a domestic North American decline. International ARPU declined, however, from US$3.98 to US$3.88.

The more lucrative domestic US and Canada streaming subs base dropped by 600,000 during the quarter to end with 52 million, with ARPU rising from US$10.83 to US$11.65.

D2C distribution Q4 revenue increased by 4% excluding currency movements, primarily attributable to new partnership launches, price increases, shifts from wholesale to retail, and the transfer of TNT Sports Chile. The division posted a top line of US$2.167 billion for the quarter.

Advertising revenue for D2C was up 51% to US$186 million, while content revenue dropped by 30% to US$171 million due to the timing of third party licensing deals. Overall D2C revenues were up 3% to US$2.529 billion, and WBD narrowed the division’s EBITDA loss by 73% to negative US$55 million.

Declining networks

Networks revenue in Q4 meanwhile declined by 8% to US$5.037 billion, with adjusted EBITDA falling by 11% to US$2.208 billion, with declines in US pay TV subs, an exit from the AT&AT SportsNet business, the transfer of TNT Sports Chile, a drop in US (and to a lesser extent international) advertising revenue and a drop in content licensing revenue all contributing.

Studios revenue declined by 18% to US$3.173 billion, with adjusted EBITDA down 30% to US$543 million, with WBD taking a hit thanks to last year’s strikes.

The sum of the parts was that overall Q4 revenues were down 7% to US$10.284 billion, while adjusted EBITDA was down 5% to US$2.471 billion.

President and CEO David Zaslav said, “After executing against our strategic plan to reposition the company, we are now on solid footing with a clear pathway to growth. We generated $6.2 billion in free cash flow and paid down $5.4 billion in debt in 2023, which puts us at 3.9x net leverage. We have an attack plan for 2024 that includes the roll-out of Max in key international markets, a more robust creative pipeline across our film and TV studios, and further progress against our long-range financial goals and are confident in our ability to drive sustained operating momentum and enhanced shareholder value.”