As the Q4 results continue to roll in, we see newly-merged entity Warner Bros Discovery finally tap 96M subscribers, with earnings of $11B, but a posted loss of $2.1B. While it was to be expected in its first year post-merger, what do these results mean for the future? Our expert entertainment lawyer, Brandon Blake of Blake & Wang P.A, unpacks this key balance sheet for us.
A Good Start
Topping 96M subscribers is certainly a solid start for them, although Wall Street in particular is moving away from subscriber gains over other metrics as an indication of profitability for streaming companies. Still, a little over 1.2M subscribers gained in a quarter is nothing to sneeze at. Their streaming losses continue (think $217M), but we saw considerable shrinkage in losses for the direct-to-consumer segment, which carried over $600M in Q3. Paired with some strong indicators that those losses will turn around soon, it’s encouraging.
Restructuring Losses
Despite the rather startling $2.1B loss, most of this can be attributed to their restructuring changes and content writedowns from the merger. And this should be the last quarter where those have such a strong impact. Leverage is expected to drop below 4x by the end of this year. A softer advertising market did do some harm of its own, but that is universal at the moment. Interestingly, most of this slow down is on the linear side, with streaming advertising up 76% year-on-year for the company.
While Discovery+ will remain as a standalone offering, we will also see the combined HBO Max-Discovery+ platform launch on April 12th this year. We’ve also been promised a full FAST service from them at some point in the near future. Combined with the expectation to bring in $4B in cost savings, double the original estimate, WBD is going forward into 2023 with an interesting position that will be well worth watching.
