Warner Bros. Discovery failed to meet analyst expectations for both profit and revenue in the fourth quarter. This disappointing performance caused a 1% drop in the company’s shares during premarket trading following the announcement.
Despite falling short of analyst targets, Warner Bros. Discovery managed to boost its free cash flow significantly. The company reported $3.31 billion in free cash flow for the fourth quarter and ended 2023 with $6.16 billion, an 86% increase from the previous year. This increase reflects Chief Executive Officer David Zaslav’s efforts to prioritize free cash flow and reduce the company’s debt burden.
One positive highlight for Warner Bros. Discovery was the profitability of its flagship subscription streaming service, Max, which achieved adjusted EBITDA of $103 million in 2023. This success comes as a result of Zaslav’s decision to decrease content spending for the streaming service after the merger with Discovery in 2022.
In terms of financial performance, Warner Bros. Discovery reported a net loss of $400 million, or 16 cents per share, for the fourth quarter. This was an improvement from the previous year’s loss of $2.1 billion. However, adjusted EBITDA decreased by 5% to $2.5 billion, primarily due to studio revenue declines resulting from strikes by industry unions.
The company faced challenges in its studio revenue, with a 17% drop to $3.17 billion in the fourth quarter. The adjusted EBITDA for the unit also fell by 29% to $543 million. These declines were attributed to strikes by the Writers Guild of America and the Screen Actors Guild – American Federation of Television and Radio Artists.
Warner Bros. Discovery reported a 14% decline in linear television advertising revenue, excluding foreign exchange impact, and a 4% decrease in distribution revenue. This decline was influenced by the ongoing trend of decreasing cable TV subscriptions.
To address the challenges in the linear television market, Warner Bros. Discovery announced plans to collaborate with Disney and Fox on a joint venture to offer a smaller, more affordable bundle of linear networks focused on sports programming. This strategic move aims to adapt to changing consumer preferences and increase the company’s competitiveness in the evolving media landscape.
Overall, while Warner Bros. Discovery faced setbacks in meeting analyst expectations and experienced declines in certain revenue streams, the company’s emphasis on boosting free cash flow and achieving profitability in its streaming service demonstrate a strategic focus on long-term growth and sustainability.
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