U.S. Ad Market Still Weak In Q4, 'Small Green Shoots' In Q1: WBD's Wiedenfels

The weak national TV advertising market in the latter half of the fourth quarter of 2022 and the first quarter of the new year have not yet witnessed any significant positive results, according to one Warner Bros. Discovery senior executive.

“It's fair to say that trends have also not gotten better,” says Gunnar Wiedenfels, chief financial officer of Warner Bros. Discovery, speaking during Citigroup’s media/entertainment conference on Thursday.

“If anything, [it has] gotten worse through the course of the fourth quarter from a U.S. ad market perspective. And while we're seeing some small green shoots for the first quarter, I wouldn't want to call the turn here yet.”

Wiedenfels did not provide specific details, but did say some markets are “equally negative” to that of the U.S. -- including the United Kingdom and Germany. But he added that markets such as Poland, Italy and Latin America are doing fairly well.



From an investors' perspective, with regard to the company’s performance, Wiedenfels says: “The ad market environment clearly is the number one swing factor."

He adds that for the company’s linear TV networks, its affiliate teams have renewed more than 30% of its important U.S. affiliate revenue in the fourth quarter.

“It's just a great proof point for the value that our linear portfolio is bringing to affiliates and to our consumers, our viewers... We got a lot of questions about what's going on in the linear world.”

With regard to the highly visible billions of dollars that TV-based networks are spending on content -- especially on new streaming platforms -- Wiedenfels says:

“We shaved off a lot of the excess last year, and I think that's something that everyone else in the industry is going to go through. We're coming from an irrational time of overspending with very limited focus on return on investment.”

Last year, Warner Bros. Discovery made key decisions to stop production on the expensive “Batgirl” movie that was destined for the company’s premium streamer, HBO Max. It also stopped the costly, long-running, and award-winning HBO futuristic drama “Westworld.”

With all that behind the company, however, he says: “You're going to see a very significant increase in film output, content in general -- games as well.”

Later this year, the company has plans to merge the discovery+ and HBO Max streaming services. Even before this happens, the company has been seeing strong subscriber gains in the fourth quarter “despite a certain amount of pullback on the branding and marketing side.”

Wiedenfels believes this is being pushed in anticipation of the new streaming product launch. One major push with the new merged service will be a better approach to advertising-supported options. “We'll get more engagement, more subscribers, but then importantly, pricing power, CPM upside from better reach, better scale, better data, better targeting.”

He also says the company -- as Warner Bros. Discovery CEO David Zaslav mentioned last year -- is continuing to explore the idea of starting up a streaming FAST (Free Ad Supported TV) service.

Fox Corp. and Paramount Global have seen strong advertising revenue results from their respective free, ad-supported streaming services, Tubi and Pluto TV.

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