M+E Connections

The new sports streaming venture recently announced by Disney, Fox and Warner Bros. Discovery (WBD) represents “another potential driver of incremental growth for our business going forward,” David Zaslav, CEO of WBD, said Feb. 23, during an earnings call with analysts for his company’s fourth quarter and fiscal year (ended Dec. 31).

The joint venture will “provide a terrific consumer experience and will be a great business,” he said, adding: “We couldn’t be more excited about it. We’ll also be able to bundle this product with Max.”

Although shares in WBD fell 10% on Friday, after the company reported a decline in Q4 revenue, it became the first Hollywood conglomerate to post a profit for its streaming business for a full year. WBD swung to a $103 million profit in 2023 from a loss of more than $2 billion the prior year.

“We are optimistic that the efforts we’ve undertaken on digital and advanced advertising solutions, much of which you’ll hear about leading up to and during the [coming] upfront, will enable us to achieve a more competitive profile,” Zaslav told analysts on Friday.

“Bottom line, we’re a far healthier company now, and we’re building real momentum,” he said. “And we expect 2024 will be a year to drive that momentum forward even further.”

But he conceded: “This business is not without its challenges. Among them, we continue to face the impacts of ongoing disruption in the pay-TV ecosystem and a dislocated linear advertising ecosystem.”

The company’s studios, meanwhile, are “back and firing on nearly all cylinders after the strikes,” he said. “We’re one of the biggest makers and sellers of content in the world. On the theatrical and gaming side, while we did have some real misses this year, we also had some really big wins, including Barbie, the number one movie globally and the most successful movie in the history of Warner Bros., and Hogwarts Legacy, the biggest game of 2023.”

The company also relaunched its theatrical animation division last year, with a “commitment to have two features a year on our slate beginning in 2026,” he said.

WBD’s number one “priority for us has been building Max, our streaming service,” he went on to say. “We fought hard to get Max to be profitable last year. We are now committed to driving profitable top line growth. And while it’s still early innings, we feel good about the trajectory we were on and are on track to achieve our guidance of $1 billion in EBITDA in 2025. We’re especially excited about the next 24 months. We have a number of meaningful growth levers ahead, including the rollout of Max in key international regions and markets, starting with Latin America next week, with markets in EMEA and APAC to follow later in the year, including new markets, France and Belgium to coincide with the Paris Olympics this summer.”

Max is still only available in “less than half the addressable households and markets as compared to our larger peers, so we still have a huge opportunity for growth and globalization over the next two years, including many critical markets around the globe, such as the U.K., Germany, Italy, Australia and Japan,” he said.

By the end of this year, the streaming service will be available in more than 40 markets worldwide, he noted.

The company has also started to see an “inflection in subscriber-related [streaming] revenues, both distribution and advertising, which accelerated to over 6 percent during the second half of the year versus very modest growth in the first, helped by price increases, growth in the ultimate tier, and scaling of the ad-lite subscriber base,” according to WBD CFO Gunnar Wiedenfels.

In the company’s direct-to-consumer (D2C) business, which includes streaming, WBD “finished the quarter with nearly 98 million subscribers, a modest sequential increase,” he told analysts. “International remains the most important driver of our D2C subscriber growth, with over 1 million subscribers gained,” in Q4, which he said, “more than offset domestic declines, where we continue to feel the impact of the partly strike-driven lack of fresh tent-pole content through the second half of the year.”