Shares of Warner Bros. Discovery climbed over 8% on Thursday as the streaming division swung to a profit of $409 million in its fourth quarter of 2024 and added 6.4 million subscribers for a total of 116.9 million globally. For full year 2024, streaming profit was $677 million, up from a profit of $103 million in 2023.
The company revealed in a letter to shareholders that it has a “clear path” to reach at least 150 million global subscribers by the end of 2026 and that it anticipates the streaming segment will deliver a profit of approximately $1.3 billion in 2025.
“In this generational media disruption, only the global streamers will survive and prosper, and Max is just that,” CEO David Zaslav said on the company’s earnings call on Thursday.
But the company’s net loss for the quarter widened as the media giant was weighed down by lower profits and revenue in its linear networks business, as well as declines in theatrical and games revenue. The loss included $1.9 billion of “pre-tax acquisition-related amortization of intangibles, content fair value step-up, and restructuring expenses.”
Here are the top-line results:
Net loss: $494 million, up 24% year over year, compared to $400 million a year ago.
Earnings Per Share: A loss of 20 cents per diluted share, compared to a profit of 4 cents per share estimated by analysts surveyed by Zacks Investment Research.
Revenues: $10.02 billion, down 1% year over year, compared to $10.37 billion expected by Zacks.
Subscribers: Added 6.4 million subscribers for a total of 116.9 million globally. For the full year, the company added 19 million subscribers.
Adjusted EBITDA: $2.72 billion, up 10% year over year, compared to $2.47 billion
Warner Bros. Discovery ended 2024 with $34.6 billion of net debt. Cash provided by operating activities was $5.4 billion and free cash flow was $4.4 billion.
Streaming shines as Max international expansion continues
WBD’s streaming segment revenue grew 5% to $2.65 billion, with subscriber-related revenues climbing 8% to $2.55 billion. Content revenues fell 42% to $99 million due to fewer third-party licensing deals.
Distribution revenue rose 7% to $2.32 billion, driven by a 20% increase in subscribers and higher pricing following the launch of Max in Latin America and Europe in the first half of 2024, offset by domestic linear subscriber declines. Advertising revenue jumped 26% to $235 million, primarily driven by an increase in ad-lite subscribers.
Warner Bros. Discovery reported a total of 57.1 million domestic subscribers and 59.8 million international subscribers. Average revenue per user came in at $7.44 globally, $11.77 domestically and $3.74 internationally.
In 2024, Max launched in 70 countries. The company recently struck a nonexclusive agreement to launch on Sky in the UK and Ireland, which will bring the streamer to approximately 10 million Sky subscribers by the second quarter of 2026. It also will launch in Germany and Italy in the first quarter of 2026.
“Our global expansion still has significant runway as Max rolls out to over
40% of the addressable global market where it is not yet available,” the company said.
In addition to Max’s international expansion, WBD said it would focus on strategic distribution partnerships and driving higher penetration in existing markets with its ad-supported tier.
“We are comfortable with this growth and ARPU trade-off given our long-term approach to building Max and the fact that we are still in the early days of our expansion,” the company continued. “Over time, through our enhanced ad products, monetization and growing reach, robust product enhancement roadmap in such key areas as personalization and discovery to drive increased engagement, and overall market wide pricing trends, we expect ARPU to eventually normalize and return to growth.”
The company will notably pull CNN Max and its B/R Sports offering from its Basic With Ads tier on March 30. It also scrapped plans to charge for its B/R Sports add-on, at least in the short-term.
“We’re openly continuing to experiment as to what the right model is and what the best way is to both drive engagement and first views or acquisition through that powerful content, but at the same time make sure we’re figuring out a business model that works,” streaming chief JB Perrette told analysts.
Linear subscriber declines, advertising softness continue to weigh on networks business
The linear division saw profit decline 13% to $1.92 billion, while revenue tumbled 5% to $4.77 billion, driven by continued subscriber declines and softness in the domestic linear advertising market.
Distribution revenue fell 5% to $2.61 billion, driven by a 9% increase in domestic linear pay TV subscribers as well as an impact from exiting AT&T SportsNet, offset by a 6% bump in domestic affiliate rates. Advertising revenue fell 17% to $1.62 billion, driven by domestic networks audience declines of 28% and domestic linear advertising market softness. But content revenue was a bright spot, surging 73% to $452 million primarily due to the timing of content licensing deals.
“The earnings generated by our linear networks continue to support our ability to invest in our transformation,” the company said. “We are responding tenaciously and creatively to the secular headwinds we face in the broader linear television market, and we are squarely focused on maximizing our Networks’ ongoing cash generation potential.”
WBD touted reaching multi-year renewal deals with five out of the six largest pay TV operators, which it said would deliver overall affiliate rate increases to help stabilize the network segment’s revenue over the next few years. However, it warned that greater packaging flexibility may put pressure on near-term linear trends.
“We expect the industry will continue to experience declines in pay TV
subscribers. Reduced subscribers combined with further pressure on linear
viewership, particularly for general entertainment content, makes forecasting
Networks’ advertising challenging,” the company said. “In fact, the U.S. linear television advertising market has deteriorated faster than we expected, as evidenced by our results over the last several quarters.”
While WBD has lost the U.S. rights to NBA games starting in the 2025/26 season, it reached a settlement with the league in November that will allow it to develop new shows and give the company international NBA rights in Northern Europe and Latin America, excluding Mexico and Brazil. TNT Sports will also continue to produce “Inside the NBA,” which will be licensed to ESPN and ABC. At the same time, the company added new rights to its sports portfolio, including the U.S. rights for the French Open, Unrivaled, NASCAR and the College Football Playoffs.
The cost of its newly acquired rights and the remaining portion of the NBA deal will result in elevated sports rights costs and weigh on adjusted EBITDA for 2025. However, Wiedenfels said the impact of those rights costs will reverse with an improvement of a few hundred million in 2026.
Going forward, Zaslav said WBD would continue be opportunistic about considering sports rights as they become available, but noted their focus is on maximizing returns versus simply acquiring more rights.
“We don’t need any more sports anywhere in the world in order to support our business. We would buy sports if we think it would enhance our business and it’s going to get more difficult,” he said.
In January, WBD’s new restructuring took effect, which separates its linear networks business from its studios and streaming businesses. WBD CEO David Zaslav told analysts that Warner is still working through the financial aspects of the reorganization, which it expects to wrap up in the next few weeks.
“I think this restructure creates real visibility to the strength of our studio and library and global streaming business. We’ll be better able to respond to this generational disruption,” he said. “The new structure will enhance our strategic flexibility and also create potential opportunities to unlock additional shareholder value, which we’re focused on, and we’re also focused on executing our strategy while ensuring we’re able to take advantage of broader market opportunities as they arise.”
CFO Gunnar Wiedenfels added there won’t be a dramatic change to its segment reporting and that will provide additional guidance to offer more clarity.
Studios business improves profitability, but theatrical and games drag down results
WBD’s Studios segment grew profits grew 75% to $950 million during the fourth quarter. Total revenue grew 15% to $3.66 billion, primarily driven by a 16% increase in content revenues to $3.39 billion.
Content revenues were boosted by a 64% increase in TV revenue driven by higher inter-segment content licensing and higher initial telecast deliveries, which were impacted by the WGA and SAG-AFTRA strikes in the prior year. But theatrical revenue fell 9% due to fewer releases in 2024 and games revenue fell 29% due to the better performance of “Hogwarts Legacy” and “Mortal Kombat 1” in the prior year quarter.
“Given consumers’ sustained demand – and willingness to pay a premium for great content, Studios remain one of our primary growth levers. Delivering more consistency and profitability is a top priority,” Warner said. “In 2025, industry-leader WBTV will play a key role in helping to secure that momentum, with support from improved expected results from our Motion Pictures Group and Games businesses.”
While acknowledging that Motion Pictures Group and Games business results were disappointing in 2024, WBD said it is taking action to improve performance and expect “healthy improvement” in studios profit in 2025. Zaslav emphasized that WBD is “laser-focused” on getting the studios business “back to a place of industry leadership and generating $3 billion or more in EBITDA.”
In the Motion Picture Group, those actions include several operational and production-process driven changes which it expects will result in a more balance portfolio of output, economical average cost per film and more modestly budgeted films, with the impact expected to be most visible at DC.
In the Games business, WBD is restructuring the division to refocus its resources and capital on the Harry Potter, Game of Thrones, Mortal Kombat, and DC franchises. It expects the division to swing back to a profit in 2025 and become a significant contributor to growth in the years ahead.
“I don’t think we’re going to see a year like 2024 again when it comes to what happened in the games business. This was a real outlier to the negative after it may be a bit of an outlier on the positive in 2023,” Wiedenfels said. “But based on the restructuring that JB has implemented, I think we’re in a much better place.”
