Warner Bros. Discovery Hopes That Advertising Can Make Up For Lost Subscribers

While its ad revenue is increasing, Warner Bros. Discovery (WBD) is nevertheless losing subscribers.

The company’s new streaming service, Max, which mixes programming from Discovery+ and HBO Max, lost 700,000 global users in the most recent quarter, bringing its total to 95.1 million.

During the company’s earnings report on Wednesday, CEO David Zaslav informed investors that “one of the lightest original content schedules in years” was the result of the ongoing Hollywood actors’ strike.

Additionally, the studio is losing money from customers who previously paid for both HBO Max and Discovery+ before they merged.

However, there is some promise since streaming advertising revenue is rising 29% year over year.

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WBD credits its increased ad revenue in part to live programming viewing, something that the previous HBO Max lacked. During the previous quarter, WBD created a sports add-on tier for Max and introduced CNN Max, a new live news app within the platform. (Perhaps it works out better than CNN+.)

The studio chose to concentrate on news and sports because such genres draw in new, younger people who aren’t willing to pay for traditional TV. According to Zaslav, live content should assist WBD in lowering customer attrition, which is now “the biggest issue we face,” and increasing engagement.

He said that WBD is already witnessing a big increase in engagement (measured in time spent) after integrating live sports and news to Max in the autumn. Additionally, average revenue per user (ARPU) has increased 6% YoY to $7.82 due to the expansion of streaming ads.

According to CFO Gunnar Wiedenfels, if WBD was able to increase its ad revenue during the previous quarter while having “virtually no fresh content” on Max, then the firm is well-positioned to benefit even more from streaming once the actors’ strike ends.

As of right now, Wiedenfels stated, Max is headed toward more profitability.

WBD also had positive news: after acquiring Discovery last year, Warner Media paid off an additional $2.4 billion in debt.

According to Zaslav, WBD can “allocate to other growth opportunities”—specifically, “distributing our IP in ways that maximize reach”—the more debt it pays off.

This year, for instance, WBD licensed HBO content to Netflix, Roku, and Tubi. Over the summer, it also strengthened its alliance with Sky, the massive European cable company, to reach new markets. WBD plans to introduce Max in Latin America in the first quarter of the following year, and then a few European markets during the rest of the year.

Zaslav, like Paramount in last week’s earnings call, also hinted at the possibility of pay TV bundles.

The recent carriage dispute between Disney and Charter Spectrum generated “a lot of noise,” according to Zaslav, but in the end, Disney agreed to include its streaming content in Spectrum’s most popular cable package, and the agreement was “structured in a way that’s favorable for both parties.”

That carriage agreement will probably become the standard for other programmers to follow.

According to Zaslav, streamers benefit from the standard bundle because it attracts more pay TV consumers. And at this point, WBD needs subscribers.

Warner Bros. Discovery Hopes That Advertising Can Make Up For Lost Subscribers

While its ad revenue is increasing, Warner Bros. Discovery (WBD) is nevertheless losing subscribers.

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