Warner Bros sales fall short with movie misses and poor ad sales

Warner Bros Discovery reported sales and profit that fell short of analysts’ expectations as the entertainment giant wrestled with lower TV ad sales and poor performance at its movie studios.

The parent of CNN, TNT and other cable networks generated sales of $9.96 billion (€9.3 billion) in the first quarter, compared with the $10.3 billion (€9.6 billion) average of projections on Wall Street and down 7 per cent from a year earlier. Adjusted earnings of $2.1 billion (€1.9 billion) before interest, taxes, depreciation and amortisation (Ebitda) also fell below the market’s projections for $2.18 billion (€2 billion) and were down 20 per cent from last year despite some hits including Dune: Part Two, which the firm said was the highest-grossing movie of 2024 so far based on global box office receipts.

The shares fell 4.4 per cent in premarket trading.

The earnings miss was due in part to the poor performance of Suicide Squad: Kill the Justice League, which generated significantly lower revenue in the quarter, the company said in a statement on Thursday.

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Sales at the Warner Bros studios fell 12 per cent to $2.82 billion (€2.6 billion), the result of strikes that halted production last year and the comparatively weaker performance of the new Suicide Squad video game. Last year’s first quarter included strong numbers for Hogwarts Legacy, a Harry Potter-themed game.

Chief executive David Zaslav has ordered his lieutenants to find additional opportunities for cost-cutting in order to hit financial targets for the next couple years, Bloomberg has reported. That could include more lay-offs at the company, which has eliminated more than 2,000 positions over the past year, according to people with knowledge of the matter.

The company, the home of HBO and the Warner Bros studios, has also decided to raise subscription prices as it seeks to reach $1 billion (€928 million) in earnings from the Max and Discovery+ streaming services next year, the people said. At the same time, Warner Bros and Walt Disney are planning to sell their streaming services – Disney+, Hulu and Max – together in one bundle starting this summer in the US.

Ad sales at Warner Bros’ TV networks, the company’s largest business, fell 11 per cent to $1.99 billion (€1.8 billion), driven by audience declines in domestic entertainment and news networks.

The streaming business, which includes the Max and Discovery+ services, reported earnings before interest, taxes, depreciation and amortisation of $86 million (€80 million), up 72 per cent from a year earlier. Total subscribers, at 99.6 million, beat the 98.9 million average of analysts’ forecasts. Advertising in that segment rose. – Bloomberg