Key points:

  • Warner Bros. Discovery posted a better-than-expected quarterly loss.
  • Advertising revenue for the company’s networks fell 11% in the first quarter.
  • The company’s overall revenue for the quarter fell 12%.

Warner Bros Discovery posted a better-than-expected quarterly loss amid a sharp decline in cable advertising revenue and problems in the studio segment caused by last year’s strikes in Hollywood.

Streaming doesn’t cover the decline in advertising revenue

Advertising revenue for Warner Bros Discovery networks fell 11% in the first quarter. On Tuesday, Disney reported a similar decline.

Meanwhile, Warner Bros Discovery’s streaming service saw strong growth, adding 2 million subscribers and increasing adjusted core earnings 72% to $86 million.

Investors are urging the company to focus on profitability rather than subscriber growth as Netflix dominates the streaming market.

According to LSEG, the company’s revenue of $9.96 billion fell short of analysts’ expectations of $10.23 billion. The loss of 40 cents per share was also larger than expected, amounting to 24 cents.

Why is the company experiencing difficulties?

Warner Bros Discovery’s results reflect an overall downward trend in advertising revenue in the U.S. and some international markets as companies tighten cost controls ahead of possible interest rate hikes.

Warner Bros Discovery and Disney have partnered to offer a bundle of their streaming services Disney+, Hulu and HBO Max in the US. The cooperation will start this summer. Earlier this year, the same companies, together with Fox Corp, launched a streaming service for sporting events. Warner Bros Discovery CEO David Zaslav said he hopes to reach an agreement with the NBA to retain broadcast rights to the league’s games.

Despite Dune: Part Two becoming the highest-grossing film of 2024 with more than $700 million worldwide, Warner Bros Discovery’s overall revenue fell 12% for the quarter.

The company continues to struggle due to the fallout from the double strikes in Hollywood last year. The strike led to production delays and a reduction in the number of episodes of series released in the first three months of the year.