Warner Bros. Discovery (WBD) Earnings in Q1 2024

Warner Bros. Discovery reported first-quarter results on Thursday, missing analyst expectations for both top and bottom lines despite the strength of its streaming unit.

The company's shares gained 3% on Thursday.

Here's how Warner Bros. Discovery performed, compared to estimates from analysts surveyed by LSEG:

• Loss per share: Expected loss of 40 cents vs. 24 cents
• Revenue: 9,960 million dollars compared to the expected 10,231 million dollars

Warner Bros. Discovery, owner of the Max streaming service, a portfolio of cable television networks including TNT and Discovery, and a movie studio, said revenue fell 7% to $9.96 billion compared with the same quarter of last year.

Warner Bros. Discovery posted a company-attributable net loss of $966 million, or 40 cents per share, an improvement from the year-earlier quarter, when it reported a loss of $1.07 billion, or 44 cents per share.

The company said total adjusted earnings before interest, taxes, depreciation and amortization decreased about 20% during the first quarter to $2.1 billion, and noted that its video game Suicide Squad: Kill the Justice League generated significantly lower revenue.

Warner Bros. Discovery said Thursday that it added 2 million direct-to-consumer streaming subscribers during the quarter, bringing its total to 99.6 million.

That segment earned an adjusted $86 million during the quarter, an improvement of $36 million from the prior-year quarter, the company said. It also saw a “modest” increase in revenue to $2.46 billion from the prior-year quarter.

Streaming ad revenue proved to be a bright spot, increasing 70%, driven by higher participation in Max in the US due in part to subscriber growth in the streaming service's ad-lite tier and the launch sports in the application.

The results release follows the announcement this week that Warner Bros. Discovery would combine its streaming services with those of disney – which unites Max, Disney+ and Hulu – and will offer it to consumers this summer, a return to the traditional pay TV package. Pricing has not yet been revealed, but it will be offered at a discount, CNBC reported.

It is the first time two media giants have joined forces to offer a streaming package as the push to make streaming profitable continues. While television networks have long been a source of revenue for media companies, the package continues to drain subscribers.

“As you know, I've been a big supporter of the bundle,” Warner Bros. Discovery CEO David Zaslav said on Thursday's earnings conference call. He noted that subscribers will have to stick with the package to take advantage of the cheaper price offer, which should then reduce so-called churn, referring to people abandoning their subscriptions.

“Attrition is the cause of death in this business and we have focused a lot on it,” Zaslav said, adding that the grouping has been a great help in reducing customer loss. “We need to approach this… in attack mode.”

The streaming entertainment package marks the second partnership with Warner Bros. Discovery and Disney in recent months. The companies, together with Fox Corporation., previously announced a sports streaming joint venture that will launch this fall.

On the sports front, Zaslav said Thursday that media rights negotiations with the NBA, which has long been a staple on cable channel TNT, are still ongoing, and that he is “hopeful to reach to an agreement that makes sense for both parties.

NBCUniversal recently made a bid to re-own the rights, CNBC previously reported. Zaslav noted that while the company has strategies for various outcomes, his agreement with the NBA includes the right to match any other offer before the league makes a decision.

Last fall, Warner Bros. Discovery began offering NBA games on Max.

The company has been rolling out Max around the world, and Zaslav said Thursday that it will enter more European markets before the Summer Olympics in Paris. While NBCUniversal owns the U.S. rights to the Olympics and broadcasts them on its television networks and streaming service Peacock, Warner Bros. Discovery's Max will be the streaming home in Europe.

Although advertising revenue was strong in streaming, it remained weak for Warner Bros. Discovery's television networks, as was the segment as a whole.

Television network revenue fell 8% to $5.13 billion, and advertising revenue fell 11%. While the advertising market has been weak for some time, recent quarterly earnings show there have been improvements for digital and streaming, while traditional television lags behind.

Meanwhile, revenue from Warner Bros. Discovery's studio segment declined 12% to $2.82 billion compared to the same quarter last year. The segment was hurt by the lackluster release of the latest version of Suicide Squad and the lingering effects of the Hollywood writers' and actors' strikes last year.

On Thursday, Zaslav said the company is striving to “bring back the shine” to its film studio. As part of that, he announced that he is working on the final installment of The Lord of the Rings, with a release planned for 2026.

The company's cash position improved, with free cash flow increasing to $390 million, an improvement of $1.3 billion from the same quarter last year, the company said.

Warner Bros. Discovery has been working to reduce its debt load, which now stands at $43.2 billion, stemming from the merger of Warner Bros. and Discovery in 2022. On Thursday, the company said it paid off $1.1 billion in debt during the quarter, and also announced a $1.75 billion cash tender aimed at further reducing its debt.

Disclosure: Comcast NBCUniversal is the parent company of CNBC and co-owner of Hulu.