Warner Discovery has reported its first earnings just four months after the merger of the two entertainment giants. As expected, earnings and revenue were down on the heels of the merger and several cost-cutting measures, but “revenue did come in very low from what the Street was expecting,” noted Cheddar’s Michelle Castillo. The company reported $9.83 billion in revenue against an estimate of $11.8 billion. Warner Discovery did, however, add about 1.7 million subscribers across all its streaming platforms.


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Warner Discovery Posts Disappointing Revenue in First Report After Merger

Warner brothers Discovery earnings are out by the way, giving us some insight into the state streaming. Let's bring in our new senior reporter Michelle Castillo for more and that hi Michelle so what are the biggest takeaways here. So this is a really interesting quarter for the company because this is the first report that is combining both Warner Brothers and Discovery the deal only closed about four months ago. So we're getting some insight. We know there's a lot of cost cutting measures for them, especially considering the fact that we saw CNN plus get folded up short after it launched. It only lasted for about a month. We just heard about Batgirl getting canceled despite the company putting in a reported $90 million into the project. We're not even going to see a single minute of footage from it uh, officially and other cost cutting measures that are coming down the pipeline. So when it comes to earnings, they came in at a loss of a dollar and 50 cents. It's hard to compare it because again, this is a combined company that hasn't existed before. But the street wasn't expecting that big of a loss at this time. Revenue did however come in very low from what the street was expecting. The refinitiv estimate was 11.8 billion and they only reported 9.83 billion. One interesting point though, that did help them beat a little bit was the fact they added about 1.7 million subscribers across all their streaming platforms according to ST account. They were only estimated to add about 1.65 million. So they are notching up a few more customers than expected, but the revenue is not quite there yet. I know. And early in the call, Ceo David Zaslav said they, by the end of august they should be able to make about $6 billion towards that debt that they owe in cost cutting measures. They're hoping to do another two billion by the end of the year. But it's still a long way to go for this combined company that has a lot of potential has a lot of viewers. 193 million. 193 Emmy nominations for this combined network. But it's still a long way to go. Yeah, let's talk about combining because HBO and Discovery Plus will become one service officially next summer of 2023. What does this mean for me and you and the average viewer, you know, this is a very interesting um combination, especially because these are two services that are appealing to different groups of people, but they will combine together be a large offering that might actually be have a lot more content for people to watch. So at the most expensive tier you're looking at, Sorry, just looking at my notes. Um, you're looking at HBO really costing about 14 99 a month without ads and you have 9 99 a month with ads. Discovery Plus is about 6 99 a month without ads and 4 99 a month with ads, what's interesting enough is during this investor call, they said that they are exploring a free ad supported version of this combined service. We should get more details later. Zaslav himself said that he wants to have something at every different price here, whether that streaming or television or through traditional cable or through ad supported video on demand. So they are trying to do different things for different people's budgets but just having that much content, remember, TLC is the number one prime time network for women 25 I think to 49 TNT is the number one network for young men in general. Just thinks this from 18 to 49 thanks to the strength of their sports content. So they have a large offering that they really think can compete against the bigger people in the market interesting. And we've heard a lot of rumors leading up to today's release, especially around HBO max and possible layoffs. What's fact versus fiction here, Michelle. Well, there was an account in the rap that said that about 70% of the development team was going to be laid off. Um, and then Dylan Byers did say that that was false. So there's a lot of rumors going around, we know that David Zaslav has does run his companies like Discovery with april tight budget. We know that they're not afraid to cancel projects that have cost them a lot of money including things like Bat Girl. That's a really interesting move for them spending a reported 90 million on the project already. However if you think about when a movie is released you're still gonna have to add marketing costs and on top of that this can be a tax write off for them if they cancel the project now, so you can expect to see a lot more of these surprisingly, oh my God there, they wasted millions of dollars to put this project together, they're not even gonna release it. However, in the long run you can also look at it as they would have spent millions more to continue that and there is a lot of debt this company's combined carrying when they're combined together and with the revenue not hitting what the street is expecting, you can expect more of these quote unquote shocking decisions going forward and how are things looking in comparison to other streaming giants like oh let's say netflix. Okay, so netflix is at at this last quarter just they were around 200 20.67 million subscribers largest streamer in um in in currently, but when you're looking at something like Warner Discovery, they are around um I think it was 93 million. So they're not quite as big as a netflix out there but they should be with the strength of their portfolio. Discovery. Really appealing um being having the large cable networks, HBO max with the brand legacy, they have the premium content. Again I mentioned one 193 Emmy nominations this time around, they really need to compete on that level one leg up. They have is already they've developed that ad supported tier, that's something that netflix is just going to add next year, you know that Disney which reports next week is also going to add their ad supported tier but competition is gonna get fierce now that everyone's going to offer a lower option by 2023 people are really gonna still make tough decisions deciding which streamers they want. I just got the data from Niels and showing me the top 10 shows in july the first week of july and when it came to original shows or just programming HBO max doesn't have a single show in the top 10, it was all around Disney netflix and amazon so they have a long way to compete. But you know if you can get one of those hits you can get one of those stranger things, you can get one of those Mandalorian that can quickly shoot you up to the top of the list. Oh yeah we've seen it many many times before cheddar news, senior reporter Michelle Castillo, great reporting as always, Michelle, thank you