Warner Bros. Discovery grows DTC profit to $289M, streaming subs to 110.5M, led by Olympics

Warner Bros. Discovery CEO David Zaslav told investors on Thursday the major studio is working to uncover the hidden value of key assets. The company said that it ended September with 110.5 million global streaming subscribers, including for Max and Discovery+, compared with 103.3 million as of the end of June. The gain of 7.2 million users was the largest ever quarterly growth in subscribers since the launch of Max, with subscriber growth across all regions.

The gain was driven by the Paris Olympics, which the company’s streaming operations featured in various international markets, streaming launches in new markets, as well as fresh content following last year’s dual Hollywood strikes. Streaming subs in the U.S. also posted a small gain. Total direct-to-consumer (DTC) segment revenue increased by 9 percent to $2.63 billion, led by the sub growth.

Discussing WBD’s previously stated target of posting $1 billion or more in DTC EBITDA in 2025, Zaslav told an earnings call that the conglomerate was now expecting to meaningfully exceed that, touting “clear results” of the firm’s focus, investment and patience on Max.

The executive described the company going through a process of “generational disruption,” promising that shareholders would “see and feel significant upside” as management addresses challenges and seizes opportunities. The CEO also lauded some progress but added that “we have more work to do,” and he vowed that management would keep exploring options, both “operationally and strategically.”

“We are doing the work necessary to evaluate all steps, operationally and strategically, to improve performance and unlock shareholder value,” he told analysts. Zaslav pointed to the continuing international rollout of Max, the flagship streaming platform, and “optimizing” the networks business, which includes legacy linear TV assets.

“Getting Max right has required patience, discipline and substantial investment,” Zaslav said. The rollout in Southeast Asia will see the Max streaming service become available in 72 markets worldwide, with more to come in 2025. He added positive DTC trends will continue into the current fourth quarter, as he promised strong revenue, subscriber and profit growth.

Zaslav also addressed the studio’s collection of linear cable TV brands like TNT, TBS, HLN that face headwinds from cord-cutting and an industrywide march toward streaming. He pointed to a recent renewal agreement with Charter Communications as evidence of the “important role our linear business continues to play for Warner Bros. Discovery.”

The WBD chief promised more “consistency” from its games and motion picture businesses. “When this period of extraordinary disruption settles, based on the momentum we are seeing in our direct to consumer segment, the work we’ve done to sustain our linear TV business, and what we’re doing to return our studios to peak performance, I remain confident that Warner Bros. Discovery will be one of the companies leading the global media industry into the future,” Zaslav told investors.

During the latest financial quarter, WBD posted a third-quarter profit gain to $289 million for its DTC unit, which includes its streaming and premium pay-TV services, compared with a $111 million year-ago profit.

Zaslav told the call that the company has seen the positive DTC trends continue into the current fourth quarter, for which he promised strong revenue, sub and profit growth. While the firm has posted DTC revenue gains, sub growth and quarterly profits before, it now has growth and momentum, he signaled, taking WBD from its talking to its showing success stage.

With Netflix profitable and being seen by some observers as the king of streaming, Wall Street has been looking for Hollywood conglomerates to make their streaming business units sustainably profitable.

In the DTC unit, quarterly distribution revenue increased 8 percent, excluding foreign-currency impacts, “primarily driven by a 15 percent increase in subscribers, as well as higher pricing, following the
launch of Max in Latin America and Europe during the first half of 2024, partially offset by continued domestic linear wholesale subscriber declines.” Advertising revenue jumped 51 percent, “primarily driven by an increase in domestic ad-lite subscribers.” Global DTC average revenue per user (ARPU) climbed 1 percent to $7.84, “primarily driven by domestic ad-tier subscriber growth, higher pricing, and a continuing subscriber mix shift from linear wholesale, partially offset by growth in lower ARPU international markets.”

Meanwhile, WBD’s third-quarter results at its studios segment, which has been moving through a more challenging period, included the box-office performance of Beetlejuice Beetlejuice, which was no match for Barbie. Studios unit revenue dropped 17 percent to $2.68 billion as theatrical revenue fell 40 percent, “primarily driven by lower box office revenue as the performance of Beetlejuice Beetlejuice and Twisters in the current year was more than offset by the stronger performance of Barbie in the prior year.”

Games revenue declined 31 percent, also driven by the better performance of the prior- year slate, led by Mortal Kombat 1. TV revenue increased 30 percent, “primarily driven by higher initial telecast revenue as a result of the impact from the WGA and SAG-AFTRA strikes in the prior year,” WBD said. Studios adjusted EBITDA declined by 58 percent to $308 million.

The conglomerate’s networks segment saw the impact of cord-cutting and advertising challenges in the latest period.

Networks unit revenue rose 3 percent to $5.01 billion. Distribution revenue fell 7 percent, driven by a 9 percent drop in domestic linear pay-TV subscribers, partially offset by a 5 percent gain in domestic affiliate rates. Advertising revenue decreased 13 percent, driven by domestic networks audience declines of 21 percent and “the soft linear advertising market in the U.S., partially offset by the broadcast of the Olympics in Europe in the current year.” Networks adjusted EBITDA dropped 11 percent to $2.12 billion, with the broadcast of the Olympics in Europe negatively impacting that figure by $65 million.

WBD previously unveiled a massive $9.1 billion goodwill impairment charge to write down the value of its traditional TV networks amid cord-cutting and advertising headwinds. But Bank of America analyst Jessica Reif-Ehrlich in early October reiterated her “buy” rating and $12 price target on the stock. “We continue to believe WBD has a compelling assortment of assets,” she said. “Upcoming catalysts include 1) easing studio comparisons, 2) continued Max rollout internationally, and 3) potential recovery in advertising.”

She also highlighted a new WBD carriage agreement with Charter Communications unveiled during the latest quarter. “While there are several considerations, such as the inclusion of Max as part of the new affiliate deal, the most important takeaway was TNT affiliate rates appear to be flat versus the prior agreement and represents a much better outcome than expected” given the loss of NBA rights, the analyst concluded.

“Warner Bros. Discovery’s third-quarter results demonstrate once again that while we continue to confront extraordinary disruption in our environment, the strategy we have undertaken to ready Warner Bros. Discovery for future success is showing important results,” Zaslav said in Thursday’s earnings report. “Thanks to our rapid international expansion and continued investment in high-quality, diverse content, we saw momentum accelerate in our global direct-to-consumer business.”

And he added: “Our recently announced strategic partnership with Charter Communications, for both linear network distribution and bundling of Max, not only reinforced the value of our content portfolio, but represented our willingness to work with our partners to enhance the consumers’ experience as our industry undergoes transformation.” The Hollywood Reporter