Warner Bros. Discovery — owner of CNN, HBO and Warner Bros Studio — reported worse-than-expected second quarterly revenue on Thursday amid a number of high-profile box office flops, including “The Flash,” and declines in streaming subscribers.
The company, created last year via the $43 billion merger of WarnerMedia and Discovery, said quarterly revenue totaled $10.36 billion, short of Wall Street’s estimate of $10.44 billion.
A weaker-than-expected box office for “The Flash,” starring troubled actor Ezra Miller, hampered revenue, as did higher marketing costs for its blockbuster “Barbie,” the company said.
According to Box Office Mojo, the superhero flick, whose production budget was more ahtn $200 million, has grossed $268.4 million globally since opening in mid-June.
Meanwhile, the company’s streaming division, which includes Max and Discovery+, lost nearly 2 million subscribers during the quarter.
The company reported 95.8 million across the services, down from 97.6 million at the end of the first quarter of this year.
CEO David Zaslav said the dip in subscribers was due in part to the overlapping bases between Max and Discovery+.
The company recently migrated subscribers of HBO Max to its new service Max, which includes Discovery+ and HBO Max content.
As a result, there was some subscriber fall off for those who paid for both services.
The media giant also said there was some churn or canceled subscriptions following the end of hit series, “Succession” and the end of the first season of “The Last of Us.”
Data provider Antenna estimated that Discovery+ cancellations were up about 68% compared with June 2022 due to the switchover to Max.
The CEO noted: “While we have seen some expected subscriber disruption, we have experienced lower than expected churn throughout this process.”
He added that he expects the company’s streaming business in the US to become profitable this year.
Nonetheless, the loss in subscribers didn’t impact streaming revenue, which grew 13% to $2.73 billion, due to increases in streaming subscription fees.
The company managed narrow its second-quarter loss to $1.24 billion from $3.42 billion a year earlier, thanks to a 16% drop in total costs and expenses.
Warner Bros Discovery chief financial officer Gunner Wiedenfels noted that the advertising climate was still under pressure and the compnay expects global networks advertising revnue to decline in the “high single-digit range during the second half of the year.”
The grim forecast comes as the company’s flagship news network CNN continues to slump in the ratings, after a rocky 13-months under controversial network boss Chris Licht, who was ousted in June.
Still, the company said it had repaid $1.6 billion in debt during the quarter related to its 2022 merger of Warner Bros and Discovery and announced a tender offer aimed to pay down up to $2.7 billion more.
It follows a tender offer from June.
The company ended the second quarter with $47.8 billion in debt and $3.1 billion in cash on hand.
“The team has worked really hard in the last 16 months to restructure this business for the future to build… a real storytelling company where we can continue to invest our meaningful free cash flow to serve all of our diverse businesses,” Zaslav said. “The de-levering we’re doing now, which is really accelerated — and accelerating — is a key element of making this turn.”
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