Italian
Warner Bros. Discovery’s stock soars amidst streaming success and future prospects
In recent market trends, Warner Bros. Discovery (WBD) has witnessed a significant surge in its stock value, reaching levels not seen in nearly nine months. The primary drivers behind this surge include the impressive advancements in its Max streaming service and the potential for industry consolidation under the anticipated policies of a future Donald Trump administration.
Q3 performance drives stock surge
On Thursday morning, after reporting their Q3 results, WBD’s shares climbed over 15% in early trading, reaching $9.60 per share. This increase illustrates a renewed confidence among investors about the company’s strategic direction and its potential for growth.
Streaming segment revenue highlights
WBD’s direct-to-consumer streaming revenue rose by 9% to $2.6 billion, demonstrating strong performance in the segment. Adjusted earnings also saw a substantial jump, coming in at $289 million, which is a $178 million increase from the same quarter last year. It’s worth noting that this growth occurred despite a $41 million loss from broadcasting the Olympics in Europe.
Max streaming: Record growth and future profitability
One of the standout achievements for WBD this quarter was the exceptional growth in its Max streaming service. The platform saw its global subscriber count increase by 7.2 million, bringing the total to 110.5 million by the end of Q3.
WBD executives are optimistic about Max’s future profitability. During an earnings call, CEO David Zaslav mentioned that the company aims to exceed its target of $1 billion in streaming profit by 2025. Moreover, JB Perrette, head of global streaming and games, indicated plans for password-sharing measures that could effectively serve as a price increase for the service.
Enhancing content cadence with new releases
Discussing future content releases, Zaslav highlighted the importance of maintaining a steady stream of engaging content on Max. He cited the example of “The Penguin,” starring Colin Farrell, which premiered on September 19 and has quickly become one of the platform’s most significant launches, with viewership numbers comparable to “The Last of Us” and “House of the Dragon”.
Industry outlook and consolidation hopes
Zaslav also expressed hope that a Trump administration could potentially ease regulations, encouraging more media-industry consolidation, which he sees as essential for companies to achieve the necessary scale in a streaming-dominated market.
Challenges in the linear TV segment
However, not all areas of WBD’s business are thriving. The company’s linear TV segment, which includes networks like CNN, TBS, and the Food Network, is showing signs of strain. Though revenue increased by 3% to $5.0 billion in Q3, operating costs rose by 21%, and adjusted earnings fell by 12%. Additionally, TV ad revenue saw a 13% decline, primarily due to a significant drop in domestic network audiences and a sluggish linear advertising market in the U.S.
Discussion on business integration and future strategy
During the earnings call, analysts questioned the merit of retaining an integrated business model that encompasses linear TV, studios, and streaming services. While some competitors, like Comcast, are considering spinning off parts of their business, WBD executives emphasized the benefits of a synergistic approach. CFO Gunnar Wiedenfels asserted, “We see the benefits of running this company on an integrated basis every single day.”
Film studio revenue adjustments
WBD’s film studio also faced a challenging quarter, with revenue declining by 17% and earnings dropping by 58% year-over-year. This was partly due to the performance of films such as “Joker 2,” which CEO David Zaslav acknowledged as disappointing compared to last year’s blockbuster “Barbie.”
In an interesting strategic move, Zaslav suggested that WBD has sacrificed about $1 billion in licensing revenue over the past year, choosing instead to keep valuable content exclusive to Max. He framed this decision as an “investment” in the streaming business, geared towards strengthening Max’s content library and improving subscriber retention.
Final thoughts and outlook
As Warner Bros. Discovery navigates its multifaceted business landscape, it is clear that streaming will play an increasingly pivotal role in its growth strategy. While challenges remain, especially in the traditional TV sector, the company’s robust performance in streaming and plans for future profitability offer a promising outlook.
Continue to follow us for the latest insights and updates on the evolving dynamics of the entertainment industry. Share this news with your friends and join the conversation on our social media channels!
