Stop if you’ve heard this one before: Overall revenue is down at Warner Bros. Discovery (WBD).
On Thursday, WBD reported that overall revenue was down 4% YOY in Q3 to $9.6 billion.
Total advertising revenue also decreased to $1.7 billion, a 7% drop after currency adjustments during the third quarter.
But CEO David Zaslav told investors he remains confident in the future success of the business despite “generational disruption” thanks to the continued growth of WBD’s direct-to-consumer segment.
Ironically, WBD’s potential savior is also what’s causing the generational disruption: audiences shifting from legacy TV to streaming.
Max-imizing revenue
WBD’s DTC arm, which includes streaming services like Max and Discovery+, generated $2.6 billion in Q3, up 8% from this time last year.
Although advertising revenue represents less than 1% of that total, it did grow 49% YoY to $205 million – up significantly from a 6% growth rate in Q2, CFO Gunnar Wiedenfels noted.
Max also added 7.2 million more subscribers this quarter, bringing the now-global total subscriber count to 110 million.
Wiedenfels attributed this success to a number of factors, including WBD’s Olympics coverage in European markets, momentum from recent international launches and the Disney+/Max/Hulu bundle released in July.
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When asked for more details on the ad business, JB Perrette, CEO and president of global streaming and games, said WBD is in the “very early innings” of what could be considered ad scale.
Not only is Max still new in many markets, Perrette noted, but ad load has so far been kept intentionally light, particularly in currently running HBO series that only feature pre-roll ads.
“We’ve seen on cable that too much advertising really presents consumer challenges,” added Zaslav. “We really like the idea that you’re not going to be interrupted watching ‘House of the Dragon’ or ‘White Lotus,’ at least for the foreseeable future.”
Chartering deals
But although streaming is a priority, WBD isn’t planning to give up on linear TV anytime soon, which Zaslav called “a core vehicle” for reaching “hundreds of millions of fans worldwide.”
In particular, he cited WBD’s recent renewal agreement with Charter Communications in September. Under the multiyear deal, Charter will carry all of WBD’s linear networks on its cable service and provide ad-lite versions of Max and Discovery+ to subscribers at no additional cost.
Still, advertising revenue at WBD’s TV ad networks dropped 13% year-over-year to $1.5 billion, and distribution revenue decreased 7%, mostly driven by a 9% drop in domestic linear pay TV subscribers.
Guess it’s that generational disruption.
