It was a mostly mundane earnings call for Warner Bros Discovery, but drops in particular forms of revenue have shareholders shaking.
Warner Bros. Discovery, WBD, recently reported its third-quarter results, revealing a wider-than-expected loss and a decline in television revenue. The company faced headwinds due to Hollywood strikes and a challenging advertising market. This news sent shockwaves through the stock market, with Warner Bros. stock becoming the worst performer in the S&P 500 on Wednesday, plummeting by 16% to $10.02, marking its most substantial percentage decrease since August 2022, as reported by Dow Jones Market Data.
Competitor Paramount Global (PARA) also saw a drop in its shares, declining by 7.8% to $11.83 in response to Warner Bros.’ disappointing Q3 results.
For the third quarter, Warner Bros. reported a loss of 17 cents per share on revenue amounting to $9.98 billion. Analysts surveyed by FactSet had anticipated a loss of 9 cents per share and revenue of $9.97 billion. Comparatively, during the same period the previous year, Warner Bros. reported a more substantial loss of 95 cents per share on revenue of $9.82 billion.
A significant factor in Warner Bros.’ television revenue decline was attributed to specific substantial licensing deals from the prior year and the impact of strikes by the Writers Guild of America (WGA) and the Screen Actors Guild‐American Federation of Television and Radio Artists (SAG-AFTRA). The strikes, led by SAG-AFTRA actors demanding higher pay, residuals, and protections against artificial intelligence, have been ongoing since July. In contrast, the Hollywood writers’ strike concluded at the end of September.
Warner Bros. further noted a decline in total advertising revenue for the quarter, standing at $1.8 billion, down by 12% from the previous year, as the advertising market remained soft.
Another noteworthy aspect of Warner Bros.’ Q3 report was the decline in global direct-to-consumer subscribers. The company recorded a decrease of 700,000 subscribers, bringing the total to 95.1 million for the quarter. This decline coincided with Warner Bros.’ efforts to make changes to its streaming services. This included launching the Bleacher Report Sports Add-On to the streaming service Max and providing CNN Max to streaming subscribers.
Warner Bros. Discovery’s shares, despite this challenging quarter, have seen an increase of 3.5% throughout the year. As the media landscape continues to evolve, it remains to be seen how Warner Bros. Discovery will navigate the changing industry dynamics and rebound from the setbacks encountered in the third quarter.
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