Warner Bros. Discovery reported a larger-than-forecast loss in the second quarter, but the loss was narrower than a year ago.
The company, the owner of CNN, posted a net loss of $1.2 billion, or 51 cents a share, down sharply from the $3.4 billion, or $1.50 a share it lost over the same period a year ago. Analysts surveyed by Refinitiv had expected a net loss of 38 cents a share in the period.
The smaller loss came as the company cut costs by $2.2 billion, or 16% compared to a year ago.
Revenue rose 5% to $10.4 billion, which was close to Wall Street forecasts. The results did not include the strong box office from the movie "Barbie," which was released in the third quarter.
The company's closely watched streaming business reported a narrow $3 million loss on an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) basis. That's a big improvement from the $518 million it lost on that basis a year earlier but down from the positive adjusted EBITDA of $50 million in the first quarter.
The company launched its Max streaming service, rebranding what had been HBO Max and rolling in content from Discovery+. It said its total streaming subscribers slipped by 1.8 million to 95.8 million at the end of quarter, compared to the end of the first quarter.
The streaming service is "is tracking well ahead of our financial projections," said CEO David Zaslav.
Superman, Lord of the Rings movies?
Zaslav said that studio unit of the company "clearly under-earned their potential" in the second quarter, although that will change when results from "Barbie" hit in the third quarter and second half of the year. But he said the company would be making changes in studios' output, putting more emphasis on big box office "tentpole" movies.
"We too believe in the power of tentpoles, featuring great IP recognized by people everywhere in the world," he said. "We intend to get back to doing what we know works." He didn't give details of which tentpole pictures are in the works, but he did suggest a couple.
"A key facet of this strategy will be to lean into some of our great underutilized storytelling IP. It's been 10 years since we made a stand-alone 'Superman' movie, and nine years since the last 'Lord of the Rings,' for example," he said.
But the plans to make those kinds of films are on hold for now due to the strikes by the Writers Guild of America, which represents 11,000 writers for films and television shows, and SAG-AFTRA, which represents 160,000 actors. Production of television shows and movies for studios and streaming services have ground to a halt.
The company's financial results were helped in the short-term by the strike as CFO Gunnar Wiedenfels said the company's cash flow increased by more than $100 million in the quarter from the cost savings of not having productions taking place -- while maintaining revenue from films and shows that were completed before the strike. But Zaslav said he still has hopes that the strike can be resolved soon.
"We're hopeful that all sides will get back to the negotiating room soon and that these strikes get resolved in a way that the writers and actors feel they are fairly compensated and their efforts and contributions are fully valued," he said.
The talks with the writers union are due to resume Friday. SAG-AFTRA said it has been willing to resume talks since the strike started late on July 12, and that it is management that has refused to return to the table. Both strikes will need to settled in order to resume production.
Wiedenfels said that the companies' financial modeling "assumes a return to work date in early September." But he didn't rule out a much longer strike. He said if it strikes run through the end of the year, he would expect several hundreds of millions of dollars worth of additional free cash flow, but that earnings would be reduced.
Streaming sports and news planned
Zaslav also promised investors that he would soon have an announcement about plans to provide some of the company's sports and news offerings on streaming services. He said some of the sports it has rights to are already available on streaming services in Europe, and that all the US deals include the digital rights to the broadcasts.
The company has some CNN content on Max, although that mostly comprises scripted programs, such as documentaries, not live news.
"I've talked about news and sports as our artillery and a real opportunity for us," he said about the company's sports and news streaming plans. He said the company has been focused more on the launch of Max than on bringing streaming sports and news to the platform.
"We still have a lot of work to do. We're early on," he said. "But news and sports are important, they're differentiators, they're compelling, and they make these platforms come alive.... So you will hear from us on that soon."
Shares of Warner Bros. Discovery fell 3% following the report.
