Warner Bros. Discovery’s third quarter was mixed with Barbie coin and free cash flow beloved by Wall Street offset by sluggish advertising and the impact of the actors’ strike on the one of the industry’s biggest content creators.Streaming, which turned profitable in the first quarter ahead of most rivals but lost $3 million in Q2, was back in the black to the tune of $111 million despite a net subscriber loss as Discovery+ users continued to migrate to Max, which showcases lots of Discovery programming. Subs declined to 95.1 million in the third quarter from 95.8 million in the second quarter. Streaming revenue was up 5% to $2.4 billion on price hikes, which are sweeping the streaming landscape, and digital ad revenue that’s growing off a small base.The quarter saw the successful launch of CNN Max in late September, followed by the debut of the Bleacher Report Sports Add-On tier.Warner Bros. Discovery’s total company revenue of $9.98 billion nosed up 1%, in line-ish with Wall Street consensus. The company posed a narrower net loss of $417 million, noting more than $1.7 billion of restructuring and other charges.A decline in linear television combined with ongoing fears of a recession are hitting parts of the ad ecosystem. Advertising revenue in the Networks business fell to $1.7 billion, from $1.9 billion. 6-Total Neworks revenue of $4.8 billion was down from $5.2 billion the year earlier. Content and distribution revenue were also both lower.The strike weighed heavily on Warner Bros. Discovery. In early September, the company anticipated a hit of $300 million to $500 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for full-year 2023 due to the work stoppages — including the now settled writers’ strike. Consolidated EBITDA last quarter of over $2.9 billon, up 22%, blew past forecasts.A resolution with SAG-AFTRA looks close but meanwhile, this is the third quarter in which the Hollywood strikes loom large. Warner Bros. Discovery and other media companies thought the labor action would be over by September, and here were are in November.Studios’ revenue was up buoyed by theatrical and Barbie. The Nun II was the sixth film in The Conjuring Universe to cross $250 million in global box office. As a franchise, The Conjuring Universe has grossed nearly $2.3 billion globally, the most of any horror franchise, Warner Bros. Discovery said.Games sales rose too on the release of Mortal Kombat 1 and continued performance of Hogwarts Legacy. But television revenue declined significantly due in large part to the impact of the strikes.Free cash flow is a strong story. Also in its September note, Warner Bros. Discovery raised its FCF expectations for the full year to at least $5 billion. It said it expected to exceed $1.7 billion in free cash flow for the third quarter due to Barbie and the strike, which reduces costs. It came in with well over $2 billion.The Greta Gerwig-directed Barbie, released July 21, has made $1.4 billion worldwide, the studio’s highest-grossing global release ever.Free cash flow allows the company to slowly pay down is massive debt load, which ballooned after Discovery acquired Warner Media from AT&T. Warner Bros. Discovery said it retired $2.4 billion in debt in the quarter, ending September with $45.3 billion in gross debt.“I am very pleased with the strong financial results that our company delivered in Q3, underscored by 22% growth in Adjusted EBITDA and over $2 billion in free cash flow, putting us on track to meaningfully exceed $5 billion for the year and contributing to our nearly $12 billion in debt paydown to date,” said CEO David Zaslav. “Among the highlights, our Direct-to-Consumer business had another profitable quarter with $111 million of Adjusted EBITDA and launched its new live-programming offerings with CNN Max and the Bleacher Report Add On, which are showing early signs of contributing to increased engagement and lower churn on Max. We’ve made great strides in just 19 months and are excited to continue building on this strong momentum, as we focus on driving future growth and creating long-term value for our shareholders.”
© 2023 Deadline Hollywood.