Warner Bros. Discovery lose 1.8 million subscribers in Q2 ‘23

Warner Bros. Discovery (WBD) reported its second-quarter earnings for 2023 on August 3. The media house brought in a revenue of $10,358 million, reporting a net loss of 4 percent from the revenue reported in the same quarter last year.

The quarterly results reflect how WBD is performing over a year after its formation, when AT&T's WarnerMedia merged with Discovery. The merger led to the formation of Warner Bros. Discovery Inc. on April 8.

The company combined content from HBO Max and Discovery+ into a single streaming offering in August 2022.

Subscriptions for the streaming service steadily increased 92.1 million from its inception to 97.6 in Q1 2023. However, the quarter has led to the company seeing a minor obstruction in this increase. The streaming subscribers at the end of the quarter were 95.8 million, down from 97.6 million in the previous quarter. This is a decrease of nearly 2 million from Q1.

This decrease coincides with the company's launch of its combined Max streaming service. Max was launched to subscribers on May 23. Within a week, 70% of existing HBO Max subscribers transitioned to Max, J.B. Perrette, global streaming president, WBD, told the Wall Street Journal.

Max has only been launched in the US as of now with plans to go international next year. This saw it put the content hosted both by HBO and Discovery Plus on a single platform. The pricing for this streaming platform was pegged at $9.99 per month.

WBD also introduced a $19.99 per month “Ultimate” plan with 4K content. Further, Discovery+ has remained a standalone $4.99 per month subscription.

Reports have speculated that the loss in subscribers can be attributed to customers discarding extra subscriptions as Max and Discovery+ overlap. However, David Zaslav, President and CEO, Warner Bros, said during an earnings call that the migration to Max has gone exceedingly well with the overwhelming majority of subscribers in the U.S. successfully transferred.

“While we have seen some expected subscriber disruption, we have experienced lower-than-expected churn throughout this process," he said in the earnings call.

The company also made hefty investments to promote Max. These investments also led to a DTC loss of $3 million in the quarter.

Net losses have, however, narrowed for WBD to $1.24 billion, compared to $3.42 billion from last year. It's still greater than the $1.07 billion loss recorded in the previous quarter though. Further, the adjusted EBITDA stood at $2,149 million, an increase of 23% from last year.

This loss in subscribers does not reflect in the company's streaming revenue. Streaming revenue grew to $2.73 billion, marking a 13 percent increase.

However, advertising revenue for the company fell to $2.45 billion from $2.62 billion. Studio revenue came in at $2.58 billion, from below estimates of $3.21 billion.

Zaslav also said that the company reported over $1.7 billion in free cash flow this quarter. This is more than double the $789 million from the same quarter last year.

"The important work we are doing to transform our businesses for the future continues to drive our strong financial performance as demonstrated by meaningful improvements to our balance sheet and our now increased synergy target of more than $5 billion," Zaslav said in the earning statement.

Max will also soon be hosting sports and news programming, according to Zaslav.