Warner Bros. Discovery shares rose by 4% after announcing disappointing first-quarter revenue and ad sales. The company reported a revenue of $9.96 billion, below Wall Street’s expectations, with a loss of 40 cents per share. Sales of the video game “Suicide Squad: Kill the Justice League” were lower than the previous quarter, and television ad revenues declined due to falling viewership of networks like HGTV and CNN.
Despite the setbacks, Warner Bros. Discovery added 2 million streaming subscribers, bringing the total to 99.6 million. The company’s free cash flow exceeded expectations, reaching $390 million. CEO Zaslav emphasized the importance of focusing on free cash flow over earnings to reduce debt. However, this message has not resonated with investors.
The company surprised the market with an announcement of a new streaming bundle in partnership with Disney. This bundle will include Disney+, Hulu, and Max, available in ad-supported and ad-free versions. In addition, Warner Bros. Discovery, Disney, and Fox Corp. are collaborating on a sports streaming service featuring channels like ESPN and ABC from Disney, and sports content from TNT, TBS, and TruTV from Warner Bros. Discovery.
Negotiations with the National Basketball Association for rights are ongoing, with Warner Bros. Discovery hopeful to reach an agreement. A recent offer from NBCUniversal to pay $2.5 billion per year for the contract triggered a 10% drop in Warner Bros. Discovery’s stock. The company is working to secure the NBA rights as part of its strategy to expand its sports content offerings with Disney and Fox.
