Warner Bros Discovery (WBD) 4Q22

Pedestrians walk past a street billboard from the Warner Bros and DC comic book character The Batman in Madrid.

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Warner Bros. Discovery on Thursday posted a big loss, posting about $11.1 billion in revenue for the fourth quarter, missing analysts’ estimates as the media industry struggles with a weak advertising market.

The company’s TV Networks segment — which includes cable TV networks like TNT, TBS, and Discovery — declined 6% to about $5.5 billion, particularly as a result of declining advertising revenue.

Here’s what the company reported compared to analyst estimates, according to Refinitiv:

• Revenue: $11.01 billion versus $11.36 billion expected
• Loss per share: 86 cents versus 21 cents

The company reported a loss of $2.1 billion, or 86 cents a share, for the period. Warner Bros. Discovery shares fell after the close of business.

Warner Bros. Discovery executives began warning of a deteriorating advertising market last summer, and other media companies, including Paramount Global, have seen it hurt their profits. Underlying advertising trends continued to weaken in the fourth quarter and were exacerbated by viewership declines, Gunnar Wiedenfels, chief financial officer of Warner Bros. Discovery, said on Thursday’s conference call.

The company is grappling with restructuring costs and impairments stemming from the 2022 merger of Warner Bros. and Discovery as it tries to move its streaming business toward profitability.

The company ended the fourth quarter with $45.5 billion in debt on its balance sheet and $3.9 billion in cash. A key focus of Warner Bros. Discovery was reducing its high debt burden and cutting costs.

Warner Bros. executives said Thursday that they expect to continue to take the debt off its balance sheet significantly over the next two years. In the fourth quarter, the company repaid $1 billion in debt and has repaid $7 billion since April, when the merger closed.

“Having made the major restructuring decisions behind us, this year is our focus on building and growing our businesses for the future, and we’re off to a great start,” CEO David Zaslav said in the company’s earnings release on Thursday.

The company, which owns streaming services HBO Max and Discovery+, said its global direct-to-consumer streaming subscriber base grew by 1.1 million to 96.1 million by the end of the quarter.

Revenue for the streaming segment rose 6%, the company said Thursday, driven by a surge in subscriber growth for its ad-supported tiers.

Losses for its streaming segment narrowed, the company said. It posted a loss of $217 million for the period, “a $511 million improvement from a year ago,” it added.

Warner Bros. Discovery reported continued weakness in the advertising market, which has weighed on its earnings since last summer, when executives first warned of a slowdown in ad spending. Last week, Paramount Global reported a decline in quarterly revenue due to lower ad spend.

The company’s network TV segment was particularly affected as major sporting events such as college football and the men’s World Cup took place on other networks during the fourth quarter.

Meanwhile, the company saw its studio segment’s revenue decline 23% and found it had fewer TV licensing deals and fewer theatrical releases. The DC Comics film Black Adam was released in the fourth quarter of last year, compared to several releases including Dune, The Matrix Resurrections, King Richard and The Many Saints of Newark during the same period during the same period previous year.

On Thursday, Zaslav announced that Warner Bros. Discovery has signed a deal to make several Lord of the Rings movies while the media company leans into its franchises.