Warner Bros. Discovery released its third-quarter 2024 earnings report, presenting mixed results across its business segments due to ongoing disruptions in the media industry. The company reported total revenues of $9.6 billion, representing a 4% decrease year-over-year (3% on a constant currency basis). Despite this decline, the company recorded a net income of $0.1 billion, bolstered by a reduction in certain operating costs but impacted by $1.6 billion in pre-tax expenses related to amortization and restructuring. Adjusted EBITDA dropped to $2.4 billion, an 18% decrease compared to Q3 2023.
Operating cash flow was $847 million, a significant decrease from the previous year, primarily due to higher content investments, operational costs linked to the Olympic Games, and weaker working capital. Consequently, free cash flow fell by 69% to $0.6 billion. WBD continued to address its debt burden, repaying or repurchasing $0.9 billion, leaving it with $3.5 billion in cash and $40.7 billion in gross debt at the quarter’s end.
NETWORKS
The Networks segment saw a 3% revenue increase to $5.0 billion, driven by strong international growth despite challenges in domestic markets. Distribution revenue declined by 7% due to subscriber attrition and the exit from the AT&T SportsNet business, while advertising revenue decreased by 13%, impacted by audience declines and a soft linear advertising market in the U.S. However, sublicensing the Olympic sports rights in Europe added $578 million in content revenue, highlighting the division’s strategic advantage with major sporting events. The Networks’ Adjusted EBITDA declined by 11% to $2.1 billion.
STUDIOS
The Studios segment faced notable challenges, with revenue declining by 17% to $2.7 billion. Theatrical revenue was hit particularly hard, falling by 40% year-over-year. This was primarily due to a lack of high-grossing releases comparable to the 2023 success of "Barbie," while recent releases like "Beetlejuice" and "Twisters" underperformed. The Games division also saw a 31% drop in revenue due to the weaker performance of this year’s releases compared to the previous year's "Mortal Kombat 1." Conversely, TV revenue grew by 30%, partly influenced by the Writers Guild of America (WGA) and SAG-AFTRA strikes. Overall, Studios Adjusted EBITDA plummeted by 58% to $308 million, highlighting the pressures faced in theatrical and gaming markets.
DIRECT-TO-CONSUMER (DTC)
The DTC segment showed resilience, posting a 9% revenue increase to $2.6 billion. This growth was bolstered by a record addition of 7.2 million subscribers in Q3, driven by expansions into Latin America and Europe. The subscriber base for WBD’s streaming service, Max, reached 110.5 million globally, with the Average Revenue Per User (ARPU) rising slightly to $7.84. While distribution revenue grew by 8% due to higher subscriber counts and pricing adjustments, content revenue dropped by 11% owing to fewer third-party licensing agreements. Adjusted EBITDA for the DTC segment surged by 160% to $289 million, including a $41 million loss tied to Olympic broadcasting costs.
Parrot Analytics highlighted the continued importance of HBO and Max subscribers in the UCAN region, where they accounted for 88% of the segment’s revenue in Q2 2024. Discovery+ contributed the remaining 12%, underscoring the significant value of the HBO brand to WBD’s overall business. Since WBD's launch in Q2 2022, the UCAN DTC revenue has increased by 13%, driven by a 20.3% rise in HBO/Max revenue, despite a 20.3% decline from Discovery+.
Following the merged WBD's 2022 launch, the combined revenues of HBO Max and Discovery+ initially saw growth, which then declined over four consecutive quarters as subscriber growth in UCAN and globally began to plateau. However, starting in Q3 2023, revenue from these platforms rebounded over the next three quarters, aligned with positive subscriber growth both in UCAN and worldwide through Q2 2024. This trend presents an optimistic outlook as WBD refines its DTC strategy across its platforms, signaling potential for stronger financial performance in the streaming segment.
STRATEGIC PARTNERSHIPS AND INITIATIVES
Warner Bros. Discovery reinforced its strategic partnerships with notable agreements, including a multi-year renewal with Charter Communications. This deal not only extended WBD’s cable networks on Charter’s platforms but also bundled the Max streaming service with Charter’s Spectrum TV Select packages, broadening Max’s accessibility to a larger audience.
David Zaslav, President & CEO of the company, concluded: “Warner Bros. Discovery's Q3 results demonstrate once again that while we continue to confront extraordinary disruption in our environment, the strategy we have undertaken to ready Warner Bros. Discovery for future success is showing important results. Thanks to our rapid international expansion and continued investment in high quality, diverse content, we saw momentum accelerate in our global Direct-to-Consumer business in Q3. In total, Max delivered 7.2 million net subscriber adds, the strongest quarterly gain since the platform’s launch, resulting in healthy subscriber-related revenue growth and meaningful progress toward achieving our 2025 Direct-to-Consumer segment financial objectives. Likewise, our recently announced strategic partnership with Charter Communications, for both linear network distribution and bundling of Max, not only reinforced the value of our content portfolio, but represented our willingness to work with our partners to enhance the consumers’ experience as our industry undergoes transformation.”