• by Wayne Friedman , November 8, 2023

Warner Bros. Discovery posted higher-than-expected declines in network advertising revenue for the third-quarter period, down 12% vs. a year ago to land at $1.7 billion.

Media analysts were expecting smaller declines of around 4.5%.

“There was a clear recognition around the likelihood of persistent challenges facing the industry with references to the ‘possibility of continued sluggish advertising trends’ and a statement that it would be ‘unlikely’ that they will hit their target leverage range by the end of next year,” writes Brian Wieser of Madison & Wall on Substack.

He adds: “WBD expects incremental improvement in advertising in the fourth quarter, although this likely still means an expectation of ongoing and meaningful decline.”

Other troubling news: Global direct-to-consumer Max/HBO/Discovery+ subscribers slipped 700,000 to a total of 95.1 million, while domestic direct-to-consumer (D2C) customers were 2% lower to 52.6 million.

Mid-day trading of company stock was sharply down 16% to $9.76.

Direct-to-consumer revenue -- including its Max streaming service -- continue to rise, up 5.2% to $2.4 billion. 

D2C continued to make improvements on the bottom line -- key for stock market analysts -- with adjusted cash flow (earnings before interest and taxes, depreciation and amortization) at at positive $111 million. A year ago, this amounted to a $634 million net loss. D2C advertising revenue was up 30% to $138 million.

Along with advertising declines, linear TV networks' distribution revenues were down 3% to $2.8 billion, with overall network revenue dropping 6.6% to $4.9 billion. 

WBD’s studio revenue was up 3% to $3.2 billion. Global revenue from its theatrical movie “Barbie” topped $1.5 billion.

Company-wide revenue was up 1% to $10.0 billion, with a net loss of $417 million.