Warner Bros. Discovery posted a quarterly loss that was larger than expected as advertising sales slumped at its cable TV unit and the studio segment contended with the fallout of last year’s Hollywood strikes and poor demand for a “Suicide Squad” game.

Advertising trends in the US and certain international markets have been subdued as businesses responded to the possibility of higher-for-longer interest rates, a drag for Warner Bros Discovery and other media companies.

Warner posted a first-quarter loss of $966 million. Advertising revenue in its networks segment, which includes CNN and the Discovery Channel, fell 11% in the first quarter.

Warner’s results were hurt by last year’s Hollywood strikes. AP

Rival Disney on Tuesday also reported a drop in its traditional TV business for the January-March period.

Warner Bros Discovery’s streaming unit remained a bright spot as global subscribers rose by 2 million to 99.6 million.

The business also reported a 72% jump in its adjusted profit – a metric closely watched by investors as they pushed companies to cut back on hefty investments and focus on profitability.

The unit reported an adjusted EBITDA of $86 million, compared with $50 million a year earlier.

Investors have pushed for a focus on profitability and away from boosting subscription, as Netflix consolidates its leading position in the streaming wars.

Warner on Wednesday joined hands with Disney to offer a bundle of the Disney+, Hulu and Max streaming services in the US, starting this summer. The companies, along with Fox Corp., had unveiled a sports-streaming venture earlier this year.

Advertising revenue in its networks segment, which includes CNN and the Discovery Channel, fell 11% in the first quarter. SOPA Images/LightRocket via Getty Images

“We are effectively seeing the return of the big bundle, delivered over the internet,” said Paolo Pescatore, analyst at PP Foresight.

‘Hopeful ‘on NBA

CEO David Zaslav said the company “was hopeful” it would reach an agreement with the NBA to keep the league on Max and TNT, which has held those rights for almost four decades.

That helped shares trade flat after tumbling premarket as NBA rights are considered central to the company’s efforts to drive growth in its streaming business and retain cable customers.

Warner Bros Discovery “will become a weak third leg” in the new sports-streaming venture if its NBA deal is not renewed, said Ross Benes, senior analyst at Emarketer.

The ocmpany’s studio revenue was impacted by the underperformance of the game “Suicide Squad: Kill the Justice League,” compared with 2023’s top-seller “Hogwarts Legacy.”

Studio revenue fell 12%, despite March releases such as “Dune: Part Two,” which with over $700 million in worldwide box office is 2024’s highest grossing movie to date. REUTERS

Revenue at the business fell 12%, despite March releases such as “Dune: Part Two,” which with over $700 million in worldwide box office is 2024’s highest grossing movie to date.

The company continues to face challenges posed by the twin Hollywood strikes last year, which led to production delays and fewer episodes during the first three months of the year.

Warner Bros Discovery’s revenue of $9.96 billion missed analysts’ average estimate of $10.23 billion, according to LSEG data.

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