Industry Insider: Warner Bros. discovery Second Earnings Call
On August 7, 2024, Warner Bros. Discovery hosted their Second Quarter Earnings Call on their website where they held a session with corporate executives David Zaslav (CEO), Gunnar Wiedenfels (CFO), JB Perette (CEO and President of Global Streaming and Games), and other important financial figures. An earnings call is a quarterly conference hosted by a public company, such as Warner Bros. Discovery, during which its executives discuss the company's financial performance, business developments, and future outlook with investors.
Previously on a Hot Set, Warner Bros. Discovery was analyzed during the annual stockholder meetings in 2024 and 2023 revealing that the large media conglomerate had some trouble easing its debt burden, subsequently leaving investors and stakeholders unimpressed with the company’s tactics. Now, with the Q2 Earnings Call, a question arises: Did CEO David Zaslav improve their standing among financial investors and set a positive trajectory for the company? Well, the long answer is tricky – it requires an in-depth analysis that will take years to reveal if the company’s labor and long-drawn tactics bore any fruit. The simple answer, however, is no.
Although the earnings call highlighted both the positive and negative interactions within the company, investors seemed to focus on the lackluster revenue. According to CNBC, financial analysts estimated $10.7 billion in revenue, but it was revealed that the company made $9.7 billion, causing its share to fall 9% after the call. Adding on to the disappointment of many, there was also a 36-cent loss per share – a 14-cent increase than the predicted 22-cent loss. This is likely due to the impairment charge revealed in the Second Quarter 2024 Earnings Results sheet, reported by Warner Bros. Discovery; an impairment charge can be defined as when a company’s asset has lost value in an investment predicted to produce a profit. In this case, the impairment charge was caused by the evaluation that the TV network segment would do well when cable cutting is on the loose in this era of entertainment.
Zaslav did comment on these numbers:
“While I am certainly not dismissive of the magnitude of this impairment, I believe it's equally important to recognize that the flip side of this reflects the value shift across business models and our conviction and confidence in the growth and value opportunity across studios and our global direct-to-consumer business have never been stronger.”
Zaslav uses impairment to segway into some of the more positive outlooks for the company. In particular, their streaming platform Max. Streaming, or the direct-to-consumer (DTC) segment, was exceptional during the second quarter: “Total DTC subscribers were 103.3 million, an increase of 3.6 million global subscribers vs Q1.” Their mission, as stated in the call, was to continue to take it global, particularly in Europe and Latin America. And Zaslav even mentioned a possible alliance amidst the streaming wars with Disney Plus, Hulu, and Netflix. With the access to Disney Plus they plan to capitalize on the growing streaming and sports market, using ESPN and Fox to roll out venue sports. While the earnings call certainly pivots away from some of the other uninspiring revenue problems, it is difficult to blame the executives for focusing heavily on streaming – it's the current golden child of Hollywood and, in many ways, the saving grace for Warner Bros. Discovery.
It is not all sunshine on the streaming front. It was reported that direct-to-consumer streaming decreased 5% or to $2.57 billion in revenue. However, Zaslav and Perette didn’t seem concerned as the drop was caused by a lack of licensing deals during the quarter and the advertising revenue went up a whopping 99%.
Ultimately, the earnings call highlighted the company's focused efforts on strengthening its streaming platform, Max, which continues to be a bright spot amid a challenging financial landscape. However, the company must address its broader financial challenges, particularly as revenue fell short of expectations and an impairment charge weighed heavily on investor sentiment. The good news, however, is that Warner Bros. Discovery has made progress in reducing its debt burden, paying down $1.8 billion in the second quarter. This move signals a commitment to resolving financial issues, but the road ahead requires focus and strategic planning. While streaming offers a promising future, Warner Bros. Discovery must balance this with strategic measures to stabilize and grow its overall financial health.
