Deadline: David Zaslav Says Warner Bros Discovery’s Streaming Business Is “No Longer Bleeding”

Story from Deadline:

Warner Bros Discovery CEO David Zaslav has said the Warner Bros Discovery’s U.S. streaming operation is “no longer bleeding” after it posted a $50M profit for Q1 this year. “It’s harder to run a business when you have a big bleeder,” he told investors on an earnings call minutes ago.

Warner Bros Discovery had posted several quarters of streaming losses before today’s swing into the black. The EBITDA spike is good news for Warner Bros Discovery as it gears up to launch its HBO Max/Discovery+ hybrid service Max this year. U.S. streaming subs were up 1.6 million to 97.6 million overall.

“When you run a business, you’re looking for growth, which we’re going to get in the streaming business and we’re striving to get throughout the company as the economy improves, but the key here is our U.S. streaming business is no longer bleeding.

“Getting this business under control, focusing on what people love to watch and how we create content people love and now with Max we’ll be able to nourish and delight subscribers with the greatness of HBO, whether it’s The White Lotus, House of the Dragon, The Last of Us Succession and put it together with Discovery.

Warner Bros Discovery CEO and President of Global Streaming JB Perrette provided some color on how the Burbank-based company would quantify success for Max after it launches on May 23. “In the very near term, migration success is one of the key metrics — i.e. getting the HBO Max customers migrated over to Max,” he said.

Brand awareness, customer satisfaction and engagement would be the three further term metrics by which Warner Bros Discovery will assess Max’s performance. “Over time, we obviously want to see subscriber growth and scale.”

Elsewhere, Zaslav confirmed Warner Bros Discovery was “actively” looking to add news and sport to Max. Both genres have proven difficult for streaming services.

On the international front, the Max roll out will follow the U.S. launch but Warner Bros Discovery remains targeted in how it approaches individual territories. In recent weeks, the company has struck major content licensing agreements in Canada with Crave and India with Viacom18, and output agreements with the likes of Sky in the UK remain in place.

“We have content in every language and channels in every country,” said Zaslav. “It’s a real advantage, but we’re really driven by free cashflow and long-term free cashflow growth. If there’s a market like India, where we can structure a deal to make a lot more money by licensing our great content [we’ll do it].”

He noted that Warner Bros Discovery would assess whether DTC or licensing was the most likely route to profitability as an “economic analysis,” but streaming was ultimately the play.

“You will see in most markets it will be us building asset value, owning it and driving it for long-term growth,” he said.

Warner Bros Discovery today posted total Q1 revenues of $10.7B, 5% down compared with 12 months earlier — in line with Wall Street expectations. A net loss of $1.07B included $1.81B of pre-tax amortization costs from “acquisition-related intangible assets” and a $95M pre-tax restructuring change.

Zaslav said it was “an important time for Warner Bros. Discovery,” adding, “We’ve come through some major restructurings and have repositioned our businesses with greater precision and focus, and we see a number of positive proof points emerging, with DTC perhaps the most prominent. We made a meaningful turn this quarter with $50 million in segment EBITDA and 1.6 million net adds, and we feel great about the trajectory we are on.

"In fact, we now expect our U.S. DTC business to be profitable for 2023 – a year ahead of our guidance. Even in today’s challenging marketplace, we are positioned to drive free cash flow and deleverage our balance sheet, and we remain confident in our strategy and ability to achieve our financial targets.”

The $43B merger of WarnerMedia and Discovery closed last year, with former Warner Media owner AT&T remaining a large stakeholder. The company has promised investors $4B in cost savings from the combination, up from an initial forecast of $3B.

© 2023 Deadline Hollywood, LLC.