Shares of Warner Bros. Discovery fell 19% on Wednesday after disappointing financial results that showed a drop in advertising revenue due to high interest rates and Hollywood strikes.
On top of that, the company’s leading streaming service, Max (formerly HBO Max), continued to experience an alarming series of subscriber declines. The service’s subscriber numbers fell by 700,000 in the third quarter after dropping 1.8 million in the second quarter, for a total loss of 2.5 million subscribers in six months. The company ended its most recent quarter with 95.1 million total subscribers.
Given the far-reaching impact of the recently ended Hollywood strike, it would be surprising to see subscriber numbers decline across the board among entertainment giants, but that wasn’t the case.
While Max lost subscribers in its latest quarter, Netflix added 9 million, thanks in part to a successful crackdown on password sharing. Meanwhile, Disney+ added his 7 million subscribers, Paramount+ added his 2.7 million and NBCUniversal’s Peacock added his 4 million.
“Warners’ poor performance is a bit disappointing considering other companies have performed better,” said Naveen Sarma, managing director at S&P Global. luck.
Investors saw this as a disaster, and the company’s stock price plummeted. The company’s stock fell nearly 20% to close at $9.40 on Wednesday, but rebounded modestly to $10.13 on Friday.
Max has long been touted as a champion of prestige television, with acclaim including: the sopranos, game of thrones, and inheritance, and yet subscribers are leaving. According to Sarma, there are several reasons for this.
sports and strikes
First, until recently, Max didn’t stream live sports like some of its competitors. The platform announced it will offer free live sports streaming slots including MLB, NHL, NBA, college basketball and U.S. Soccer from October 5th until March 2024, after which there will be an additional $10 monthly fee. . In contrast, Disney has long owned ESPN and ESPN+, Apple TV hosts Major League Soccer and broadcasts MLB games, and Peacock simulcasts several sports, including NFL games and WWE events. ing.
Sports is one of the few must-see TV shows left, and one of the things that keeps viewers from cutting the cable cord. That’s why it’s so important for streaming services to offer it in order to retain existing subscribers and attract new ones. Without the cushion of sports entertainment, Max becomes more vulnerable to “cyclical pressures on TV advertising,” Sarma said.
“People still watch the NFL, and advertisers still advertise about it,” Salma added. The company’s limited presence in streaming sports “probably benefited NBC, Paramount and Disney’s ad numbers compared to Warner Bros.”
Warner Bros. has seen “encouraging” results just six weeks after launching its sports product, Warner Bros. Discovery CEO David Zaslav said on an earnings call Wednesday. “Churn is down and engagement is up. In many cases, the people watching don’t have a TV, so we’re reaching a whole new audience, and our audience is younger. ” he said.
“Our sports business makes sense. Over the last few years, we have realized the benefits of sports subscriptions,” Zaslav added, referring to the broader streaming industry. “But we don’t own all the sports, so the idea of being able to put that on our platform is great.”
The Hollywood strike also contributed to the decline in Max’s subscribers. On the same conference call, Warner Bros. Discovery CFO Gunnar Wiedenfels said the subscriber hemorrhage was a “moderate sequential loss” largely the result of “unusually light content.”
The nearly four-month Hollywood strike has halted the production and release of new television and movies. Warner Bros. Discovery also produces a lot of content for its own streaming platform, and distributes content for or co-produces content with third parties, so any work stoppage would mean the company It had a particularly big impact.
This differs from Netflix and its revenue, which far exceeded analysts’ expectations. Netflix’s distribution schedule, similar to the Japanese manga version, minimized the impact of the strike, as the work stoppage began after many shows had finished. one piece New seasons of shows like virgin river.
Meanwhile, Disney is preparing to expand ESPN from just a cable TV channel to a standalone “direct-to-consumer” streaming product. The company also reported better-than-expected profits and additional cost-cutting plans, sending its stock soaring 8% to a high of $91.04 per share on Thursday, the day after the earnings release.
“Nothing cures a media company like having content,” Sarma said. “The fact that the strike is over and we can get back to production is going to be really good for everyone.”