Warner Bros. Discovery Sees Content Revenue Drop 27% to $1.9 Billion in First Quarter on Lower Box Office, Home Entertainment

Despite posting a narrowed quarterly loss, Warner Bros. Discovery missed Wall Street expectations for its first quarter of 2025 on Thursday as revenue tumbled 10% to $9 billion.

Revenue was dragged down by a 27% decline in content revenue, primarily driven by lower box office and home entertainment revenues due to strong performance from the theatrical releases of “Dune: Part Two” and “Godzilla x Kong: The New Empire” in the prior year period and carryover from releases in the fourth quarter of 2023, as well as no games released in the latest quarter. The decrease in home entertainment revenue was primarily due to the robust performance of “Wonka” and “Aquaman and the Lost Kingdom” in the prior year.

It was also weighed down by an 8% decline in advertising revenue as as ad-lite subscriber growth was more than offset by domestic linear audience declines and a 2% decline in distribution revenue as growth in global streaming subscribers was more than offset by continued domestic linear pay TV subscriber declines.

Here are the quarterly results:

Net loss: $453 million, down 53% from a loss of $966 million a year ago.

Earnings Per Share: A loss of 18 cents per diluted share, compared to a loss of 13 cents per share estimated by analysts surveyed by Zacks Investment Research.

Revenues: $9 billion, down 10% year over year, compared to $9.75 billion expected by Zacks.

Streaming subscribers: Added 5.3 million subscribers for a total of 122.3 million globally.

Adjusted EBITDA: $2.1 billion, flat compared to a year ago.

Free cash flow fell 23% to $302 million, while cash provided by operating activities fell 5% to $553 million.

WBD shares fell 2% in pre-market trading on Thursday following the earnings announcement.

No Material Impact From Trump Tariffs

Though WBD has not seen any material impact from President Trump’s tariff policy, WBD warned in its quarterly shareholder letter that numerous aspects of its business, most notably advertising, are sensitive to the macroeconomic environment.

“Significant inflation or other factors that negatively influence consumer sentiment and expenditure could have material impacts,” the company added. “In the past, we have effectively managed our business through periods of uncertainty, economic turbulence, and even recession, such as the COVID pandemic. As in those cases, we have again acted swiftly, though prudently, to control costs and are preparing for all ranges of scenarios over the months to come, while continuing to invest for future growth.”

In January, WBD’s new restructuring took effect, which separates its linear networks business from its studios and streaming businesses. The move is designed to improve strategic optionality and flexibility.

“We believe the existing ecosystem, including content producers and both networks and streaming distribution platforms, will undergo significant change,” Warner added. “With added flexibility and expanded pathways to create
shareholder value as a result of this new structure, our Board of Directors now has a greater number of tools at its disposal as it evaluates and enacts changes.”

Streaming a bright spot as Max international expansion continues

Streaming was a bright spot, posting a profit of $339 million, up from $86 million a year ago, and saw total revenue grow 8% to $2.7 billion.

Distribution revenue increased 7% to $2.33 billion as a result of a 23% increase in subscribers following the ongoing global expansion of Max, as well as new domestic distribution deals, which were offset by lower average revenue per user due to a shift in the subscriber mix. Ad revenue jumped 35% to $237 million on ad-lite subscriber growth.

Subscriber-related revenue grew 9% to $2.6 billion and content revenue declined 11% to $88 million. The decline in content revenue was driven by lower third-party licensing following the launch of Max in new international markets, including Australia.

The company has a total of 57.6 million domestic streaming subscribers and 64.6 million international subscribers. Global average revenue per user fell to $7.11, while domestic ARPU fell to $11.15 and international ARPU dropped to $3.63. The decrease in domestic ARPU was primarily driven by a broader wholesale
distribution of Max Basic with Ads.

By the end of year, Max is on track to be available in over 85 markets globally. It will launch in the U.K. and Ireland, Italy and Germany in early 2026.

WBD is targeting at least 150 million streaming subscribers by the end of 2026 and anticipates the streaming segment will deliver a profit of approximately $1.3 billion in 2025. In addition to Max’s international expansion, the company said it would focus on strategic distribution partnerships and driving higher penetration in existing markets with its ad-supported tier to reach that subscriber goal.

It also launched a $7.99 per month “extra member” add-on as it looks to crack down on password sharing.

Studios takes a hit due to lower box office and home entertainment revenues

WBD’s studios business saw profits rise 41% to $259 million during the quarter, but revenue tumbled 18% to $2.3 billion.

The revenue decline was driven by an 80% drop in distribution revenue and 75% drop in ad revenue to $1 million each, while content revenue slipped 18% to $2.13 billion and other revenue fell 8% to $173 million.

In addition to the declines in box office and home entertainment revenues, games revenue fell 48% due to the prior year release of “Suicide Squad: Kill the Justice League,”compared to no releases in the current year quarter, as well as higher carryover from “Hogwarts Legacy” and “Mortal Kombat 1” in the prior year. TV revenue fell 4%, primarily driven by higher intercompany content sales, partially offset by lower initial telecast revenue due to the timing of deliveries.

“We continue to implement both strategic and structural changes to better position our Studios for long-term growth with the goal of driving more consistent performance and greater profitability,” the company wrote in its shareholder letter. “We are very encouraged by our current trajectory and momentum, especially in TV and Film, as we advance towards our goal of at least $3 billion of Studios Adjusted EBITDA.”

In the second quarter, WBD said a large licensing renewal with the streaming segment would also benefit the studios segment, similar to the renewal in the fourth quarter of 2024.

Global linear networks weighed down by cord-cutting

Global linear networks continued to suffer from cord-cutting, with profits falling 15% to $1.8 billion and revenue dropping 7% to $4.8 billion.

Distribution revenue fell 9% to $2.6 billion, driven by a 9% decrease in domestic linear pay TV subscribers, partially offset by a 2% increase in domestic affiliate rates. Additionally, distribution revenues were negatively impacted by
lower international affiliate rates and international subscriber declines.

Ad revenue fell 12% to $1.8 billion, primarily driven by a 27% decline in domestic networks audiences offset by better trends in sports and international. Content revenue climbed 44% to $380 million, primarily due to the timing of third-party content licensing deals.

WBD touted a 5% improvement in year over year advertising growth over the fourth quarter of 2024, driven by its domestic sports schedule, including viewership growth for March Madness and healthy demand for sports inventory.

International ad markets, such as Polan and Italy, have significantly outperformed domestic due to continued strength of WBD’s free-to-air networks. The Europe, Middle East and Africa region now accounts for 20% of global linear advertising revenues.

Looking ahead, Warner expects a 2% year over year headwind to ad revenues in the second quarter due to the absence of the Final Four, offset by carriage of the Stanley Cup Finals. The French Open and NASCAR will debut on TNT sports in the second quarter, temporarily resulting in higher sports rights costs and production expenses on top of the annual escalation for existing sports rights.

More to come…

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