Some streaming services have flipped to profitability, but Warner Bros. Discovery (WBD) continues to sustain losses.
WBD’s overall revenue fell 5% year-over-year to $9.7 billion, continuing a recent decline and missing investor expectations, according to its earnings report on Wednesday. WBD shares dropped 8% during after-hours trading.
Still, WBD insists it’s all part of a plan.
“We will always prioritize investing to secure profitable Max subscribers versus maximizing near-term [profits] in any given quarter,” CFO Gunnar Wiedenfels told investors.
In other words, WBD is playing the long game. Scale comes first; profits happen later.
Max’s global tour
Global expansion has been a major boost to subscriber growth for Max, which was first relaunched from HBO Max in the US in May 2023. Max has since expanded to 65 international markets across Europe, Asia and Latin America, including 25 European markets such as France and Belgium over the last several weeks – in time for the Paris Olympics, of course.
And so far, WBD is “seeing the fruits of that labor” in terms of subscriber growth, Wiedenfels said. Max gained 3.6 million subs last quarter, bringing its global subscriber count up to 103.3 million. That’s nearly double the subscriber growth of 2 million Max saw in the prior quarter.
WBD expects Max’s subscriber base to improve more quickly later in the year, after a full quarter of having a strong European presence, said CEO David Zaslav.
But perhaps most importantly, Max is looking for ad-supported subscriber growth. Currently, about 40% of new global subscribers are signing up for Max with ads, Wiedenfels said. So, in Max’s case, faster subscriber growth also means more rapid ad revenue growth.
Streaming ad revenue on Max doubled at 99% growth since last year, while average revenue per global Max user rose 4%. Ad revenue often increases the value of individual streaming accounts, which is why ARPU can be an indicator of a streamer’s chances at long-term profitability.
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Zaslav said Max will launch in other global markets over the next two years, including the UK, Japan and Australia.
Max plays ball
In the meantime, Zaslav said, Max is staying focused on content bundling and “building a strong portfolio of sports rights.”
WBD is gearing up for the launch of Venu Sports, a streaming joint venture with Disney and Fox. (Also on Wednesday, Sens. Elizabeth Warren and Bernie Sanders and Rep. Joaquin Castro asked the DOJ to investigate Venu for any potential antitrust violations.)
And sports are at the heart of WBD’s bundling strategy.
Last month, for example, Max’s new streaming bundle with Disney+ and Hulu came out in the US. Max also launched a bundle in Brazil with a national cable distributor.
“We’ve been big proponents of bundles given the benefits they can provide in reducing churn,” Zaslav said.
