Streaming Disruptions And Macro Challenges Face Warner Bros. Discovery

Warner Brothers On Thursday, Discovery (WBD) is slated to release its quarterly financial results after the bell as it battles rising cord-cutting, growing streaming competition, and a projected double-digit decrease in its TV advertising business.

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Following the conclusion of its highly-publicized merger last spring, the troubled media giant was put under pressure in 2022 by macroeconomic difficulties, additional subscriber losses in linear television, a slowdown in advertising, and various restructuring charges. The company recently announced a price increase for its popular ad-free HBO MAX streaming plan.

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Despite a turbulent 2022, experts at Goldman Sachs and Bank of America earlier this year suggested that the company would experience better times.

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According to data from Trade Algo, Wall Street anticipates the following from the company's fourth quarter results:

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• Bringing in $11.23 billion.
• Loss adjusted per share: -$0.13
• A total of 1.6 million net new DTC subscribers.

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While macro headwinds continue to put pressure on traditional media firms, advertising revenue may tumble by double digits in the fourth quarter after falling 14% (or 11% discounting foreign exchange) in Q3.

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The return of HBO Max to Amazon Prime Video Channels (AMZN), as well as the debuts of well-known original series like "The Last of Us," "The White Lotus," and "House of the Dragon," could increase the company's subscriber base.

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Investors will be intently monitoring any fresh information regarding the much anticipated HBO Max/Discovery+ relaunch this spring, as well as recent claims that Discovery+ will continue to operate as an independent streaming service in addition to the soon-to-launch combination platform.

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A long-term subscription target of 130 million paying customers by 2025 has been set by management.

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Investors are more concerned with profitability than they are with subscribers, which is a major problem as confidence in the fundamentals of streaming declines.

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In the third quarter, the business lowered its adjusted EBITDA expectation for 2022 from $10 billion to $9 billion to between $9 billion and $9.5 billion. Moreover, management reduced its projected EBITDA for the entire 2023 year from $14 billion to $12 billion.

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Over the next few years, WBD hopes to save $3.5 billion in costs through synergies, including $750 million in 2022 and $2 billion in 2023.

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The company's shares have increased by a staggering 60% year-to-date despite their struggles in 2022.