• by Wayne Friedman , February 23, 2024

Warner Bros. Discovery's fourth-quarter financial results -- including lower advertising revenue -- drove its stock down nearly 13% in early morning Friday trading to $8.28.

The company missed on many projections. Analysts are also concerned that the company did not provide future 2024 guidance. 

Linear TV network advertising revenues sank 12% in the period to $1.9 billion due to audience declines, with distribution revenue declining 4% to $2.8 billion. Total network revenue was 9% lower than the year-ago period to $5.04 billion.

The company's direct-to-consumer (D2C) business including Max and Discovery+ grew just 3% to total revenue to $2.5 billion. Advertising revenue -- a small part of the business -- rose 51% to $186 million, while distribution revenue was up 4% to $2.2 billion.

“Results reflected ad challenges due to macro environment softness and strike-driven content challenges, though leadership highlighted that network ad sales are improving quarter to date in the first quarter,” says Michael Morris, media analyst of Guggenheim Securities.

"Combining linear TV network and direct to consumer business," we would calculate a combined decline of 8.4% for the most recent quarter, which probably more accurately characterizes current conditions for the company,” says Brian Wieser, media analyst at Madison and Wall, a Substack publication.

Global D2C subscribers inched up by 1.3 million to 97.7 million, with the average revenue per global user 7% higher to $7.94 -- driven by the acquisition of BluTV. Without this and TNT Sports Chile, subscribers rose by 500,000.

Domestic D2C subscribers were up by 2.0 million from the third quarter to 54.6 million, while international subscribers dropped by 1.0 million to 42.3 million.

In somewhat positive news for full-year 2023, WBD's D2C business posted small profitability. Its adjusted EBITDA was $103 million versus a $1.6 billion loss in 2022.

In discussions of the new sports joint venture with Walt Disney's ESPN and Fox Corp., executives said the platform -- called ‘Spulu’, by some insiders, according to reports -- could reach 60 million sports fans outside the traditional universe. WBD says plans are for the service to be bundled with Max.

The company's studio revenue was down 17% to $3.2 billion, primarily a result of the writers' and actors' strikes in the middle of 2023.

Total quarterly revenue was down 7% to $10.3 billion, posting a narrower net loss of $400 million versus the year-ago period, when it totaled $2.1 billion. Adjusted cash flow -- earnings before interest, taxes, depreciation and amortization (EBITDA) --went lower -- 5% to $2.5 billion.

David Zaslav, president/CEO of Warner Bros. Discovery, said: “After executing against our strategic plan to reposition the company, we are now on solid footing with a clear pathway to growth.