• by Wayne Friedman , August 5, 2022

After reporting its first financial results since its merger, Warner Bros. Discovery officially announced it will combine its major streaming services -- HBO Max and discovery+ -- next summer.

The announcement was made by CEO and President of Global Streaming and Interactive JB Perrette during an earnings call with investors and analysts.

President-CEO David Zaslav said the company is considering a free, ad-supported version of the combined streaming platform. HBO Max's ad-supported option currently costs $10 monthly.

The company, meanwhile, reported a net loss of $3.4 billion on second quarter revenue of $9.8 billion.

Moreover, the company's results might get worse before getting better. It projects third quarter revenue likely will be between $9.0 billion and $9.5 billion.

CFO Gunnar Wiedenfels characterized Warner Bros. Discovery's third quarter scatter advertising marker as "softer" than the first half's.

He said he expects advertising revenue to decline between high single-digit and low double-digit percentages for the quarter.

“It will be a transition year,” Wiedenfels said, adding that comparisons with the same quarter last year will be difficult, noting that Discovery’s Eurosport sports network benefited from the Summer Tokyo Olympics in the third quarter of 2021.

The company also indicated big changes in its strategy for releasing big budget theatrical films either exclusively on HBO Max or simultaneous with their theatrical release in movie theaters.

“We cannot find an economic case for it,” Zaslav said, adding, “Our focus will always be in theatrical.”

He said “expensive direct-to-streaming movies”  do not work and that the company will focus on traditional theatrical release windows going forward.

The news follows the company's announcement earlier in the week that it shelved the straight-to-streaming release of its big budget “Batgirl" film.

During the second quarter, the company's streaming services increased subscribers 1.7 million to 92.1 million worldwide.

The company said it hopes to reach 130 million subscribers by 2025. 

WarnerMedia previously reported 76.8 million subscribers for is HBO and HBO Max services last quarter, while discovery+ reported 24 million subscribers. 

The company says it has a new definition of how it counts subscribers, which excludes 10 million “legacy" Discovery non-core subscribers and unactivated AT&T mobility subscribers from the first quarter.

HBO Max will continue to offer a wide-range of TV and movie content, the company's executives said.

The company's combined direct-to-consumer revenue rose 4% to $2.4 billion, with a combined negative cash flow of $560 million, during the second quarter.

Its legacy TV network ad business -- on a pro forma combined company basis -- grew 2% to $2.8 billion.

Distribution revenue was down 1% to $3.0 billion.

After market trading on Thursday, Warner Bros. Discovery stock sank as much as 11.6% to $15.45, after closing the trading day up 4.6% to $17.48.