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WBD Q1 A miss vs. ‘Hogwarts Legacy’ bump a year ago; Advertising is down, but streaming is profitable

A year ago, Warner Bros. Discovery cashed in from the astonishing sales of Hogwarts Legacy, the game that launched in February 2023 and sold more than 12 million copies and achieved $850 million in sales worldwide in its first two weeks. CEO David Zaslav said at the time that games were key to the merged company’s strategy. It made for some very tough competition this year as Suicide Squad: Kill the Justice League, also out in February, underperformed.

Overall, revenue was lower than the year before at $9.958 billion and fell short of Wall Street expectations of more than $10 billion. Ditto with a net loss per share of 40 cents.

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Games are part of the studio segment, where revenue fell to $2.8 billion from $3.2 billion the year before. Theatrical saw a bump from hugely successful Dune: part 2 And Godzilla x Kong: The New Empire. Adjusted EBITDA in the division fell sharply from over $600 million to $184 million.

TV numbers felt the impact of strikes with fewer episodes being delivered.

Streaming was a bright spot: WBD added 2 million subscribers to 99.6 million and had a profit of $86 million, up from $50 million the year before. Revenue stabilized, including a 70% increase in advertising sales.

A new streaming bundle with Max, Disney+ and Hulu announced yesterday, which sent the shares soaring at the time, and an upcoming sports JV with Disney and Fox, will keep the focus on DTC in an 8 ET call with analysts.

Advertising is down across all media companies and down 11% to $1.99 billion at the Networks division. Distribution revenues were also softer.

Cash flow, which is essential for paying down debt, swings from a negative $930 million to a positive $390 million. WBD ended March with $3.4 billion in cash and $43.2 billion in gross debt. It announced this morning before its earnings results that it is buying $1.75 billion in debt.

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