Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Warner Bros. Discovery Inc (WBD, Financial) has paid down over $16 billion in debt, with strong cash generation expected in the upcoming quarter.
- The company has seen significant growth in its direct-to-consumer segment, with Max adding 13 million subscribers in the third quarter alone, reaching over 110 million globally.
- Direct-to-consumer revenue increased by 9% year over year, with EBITDA up more than 175%, indicating strong financial performance.
- The renewal agreement with Charter Communications is seen as a victory, providing enhanced value to customers and creating more stability in the industry.
- Warner Bros. TV is on track for its most profitable year in scripted content in the last five years, showing strength in its TV studio business.
Negative Points
- The US linear television business faces well-known challenges and headwinds, impacting overall business performance.
- The games business is underperforming, with over $300 million in write-downs due to underperforming releases, affecting studio profits.
- Inconsistency remains an issue in the motion picture studio, highlighted by the disappointing results of Joker 2.
- Total company advertising declined by 7% ex-FX during the third quarter, with networks advertising down 13% ex-FX.
- The company faces continued secular revenue declines in advertising and affiliate revenues in the linear networks business.
Q & A Highlights
Q: Can you discuss the relationship between your investment in direct-to-consumer (DTC) and the expected EBITDA growth?
A: Gunnar Wiedenfels, CFO, explained that the DTC business benefits from growth in new markets and maturity in established ones, allowing for simultaneous subscriber, revenue, and EBITDA growth. He emphasized the importance of disciplined investment and cost management across all segments to ensure returns. David Zaslav, CEO, highlighted the strategic focus on content and platform development, which has led to significant growth in subscribers and profitability for Max.
Q: How are you approaching potential partnerships and consolidation in the streaming market, especially internationally?
A: David Zaslav, CEO, expressed openness to partnerships and consolidation, emphasizing the need for a better consumer experience. He noted the success of bundling strategies, such as the partnership with Disney and Hulu, and highlighted the importance of local content and sports in international markets. Jean-Briac Perrette, CEO of Global Streaming and Games, added that demand for Max is high, and partnerships are key to accelerating international rollout.
Q: What are your views on the potential for consolidation in the media industry, and how does it relate to your current business strategy?
A: David Zaslav, CEO, stated that the industry needs meaningful consolidation to improve consumer experience and business strength. He mentioned the possibility of bundling or merging offerings and noted that a new administration might facilitate such changes. He emphasized that Warner Bros. Discovery is focused on executing its strategy and enhancing shareholder value.
Q: How do you plan to address the challenges in the gaming and studio segments?
A: David Zaslav, CEO, acknowledged the need for focus and consistency in the gaming business, highlighting plans to concentrate on four key franchises. He also mentioned ongoing efforts to improve the studio's performance through better governance and franchise management. Gunnar Wiedenfels, CFO, noted that the studio is poised for a profit rebound, driven by improvements across film, TV production, and games.
Q: What is your strategy for pricing and cost management in the direct-to-consumer and linear networks businesses?
A: Jean-Briac Perrette, CEO of Global Streaming and Games, discussed the potential for price increases, noting that past rises have resulted in lower-than-expected churn. He also mentioned plans to address password sharing as a form of price adjustment. Gunnar Wiedenfels, CFO, emphasized ongoing cost discipline and structural measures to offset revenue declines in the linear networks business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
