Warner Bros Discovery Inc. (NASDAQ:WBD) is set to report its second-quarter earnings after the market close on Wednesday. The media giant faces significant challenges, including a declining linear TV business, an unfavorable advertising market, and the recent loss of its crucial NBA media rights.
Investors are keenly awaiting insights into how the loss of NBA rights will affect the company, especially after Warner Bros Discovery filed a lawsuit against the NBA for what it claims was an “unjustified rejection” of its matching rights proposal.
Bloomberg estimates for the second quarter are as follows:
- Revenue: $10.12 billion, down from $10.36 billion in Q2 2023
- Adjusted Loss per Share: -$0.19, improved from -$0.51 in Q2 2023
- Subscriber Net Additions: 1.89 million, compared to 1.80 million in Q2 2023
In May, WBD reported a profitable direct-to-consumer (DTC) segment for the first quarter, showing a profit of $86 million—a $36 million improvement year-over-year. This follows a profitable year for its streaming unit in 2023, which saw $103 million in EBITDA compared to a loss of approximately $2.1 billion in 2022.
Warner Bros Discovery CFO Gunnar Wiedenfels expressed confidence in maintaining profitability in the DTC segment throughout 2024 despite substantial launch investments abroad. He emphasized the company’s commitment to achieving a $1 billion-plus EBITDA target by 2025.
The recent media rights negotiations saw the NBA favoring Amazon.com Inc. (NASDAQ:AMZN) and Comcast Corporation’s NBCUniversal (NASDAQ:CMCSA) over WBD. The NBA also renewed its agreement with Disney (NYSE:DIS). WBD’s current media rights are set to expire at the end of the upcoming season.
The company has been facing profitability pressures due to a weak linear advertising environment and rising affiliate fees. These factors are likely to affect Q2 EBITDA and may jeopardize the full-year adjusted EBITDA target of $10 billion, which is $4 billion below initial post-merger expectations.
Despite these challenges, analysts have identified potential positives for Warner Bros Discovery in the latter half of the year. These include the upcoming sports streaming partnership with Disney and Fox Corporation (NASDAQ:FOX), as well as the expansion of its Max streaming service into new international markets, including Latin America and Europe. Increased bundling with competitors and recent price hikes for its ad-free streaming plans are also seen as potential profitability boosters.
However, the stock has struggled, with shares down 30% year-to-date. Linear ad revenue is anticipated to have declined another 8% in Q2, following an 11% drop in Q1. There is speculation about strategic changes, including a possible split of the company’s digital streaming and studio businesses from its legacy linear TV unit. Additionally, aggressive cost-cutting measures, including recent layoffs, have aimed to improve free cash flow.
Featured Image: Megapixl
Author Faith Yakubu 
