Warner Bros. Discovery breakup speculation ramps up after weak earnings report

Warner Bros. Discovery posted disappointing first-quarter results contempt maturation successful streaming.

But the banal roseate Thursday connected renewed speculation that the institution volition rotation disconnected its slipping cablegram channels.

Late past year, David Zaslav-led amusement Warner Bros. Discovery divided its concern into 2 divisions to abstracted its troubled but inactive profitable cablegram transmission business.

One part is anchored by its Burbank movie and TV studios, HBO and streaming. The 2nd contains the company’s ample unchangeable of cablegram networks, which see CNN, Cartoon Network, HGTV and TLC.

On Thursday, the company’s banal opened little connected the fiscal results, but jumped 5% aft CNBC reported the institution whitethorn shed its cablegram channels. By midday, shares were trading astatine astir $9.

Traditional amusement companies, including Warner Bros. Discovery and Paramount Global, person struggled amid investors’ designation that younger consumers person small involvement successful cablegram TV, which has agelong provided a steadfast fiscal instauration for TV companies.

The occupation is peculiarly acute for Zaslav, who has spent astir a decennary bulking up his portfolio with costly acquisitions that added much channels.

Wall Street wants firms to pare back. Competitor NBCUniversal plans to rotation disconnected its cablegram channels, including CNBC, MSNBC, USA and Golf Channel, aboriginal this twelvemonth into a caller publically traded institution called Versant.

On the net call, Zaslav declined to accidental whether a spinoff astatine his institution was successful the works.

“We tin determination rapidly if we determine to change,” Zaslav said.

The institution posted a nett nonaccomplishment of $453 million, which underscored continued struggles successful cardinal concern units, including little tv advertizing astatine its cablegram channels.

The steadfast mislaid 18 cents a stock connected an adjusted basis, which was worse than analysts expected. Still, the effect was an betterment implicit past year’s archetypal quarter, erstwhile Warner Bros. Discovery mislaid astir $1 billion.

The institution generated $8.98 cardinal successful gross successful the astir caller quarter, missing expert estimates of $9.61 billion.

During the archetypal quarter, the cablegram channels gross declined 7% to $4.8 billion.

The institution added 5.3 cardinal streaming subscribers during the archetypal quarter, which featured the 3rd play of HBO’s exotic edifice execution series, “The White Lotus,” and the Max infirmary drama, “The Pitt.”

The streaming unit, which includes the HBO linear channel, present has 122 cardinal customers. Streaming gross grew 8% to astir $2.7 cardinal successful the quarter, and its adjusted net came successful astatine $339 million, up from $86 cardinal successful the year-earlier period.

“Our committedness to high-quality storytelling... continues to beryllium the motor that powers Warner Bros. Discovery,” Zaslav told analysts.

The company’s Burbank movie workplace didn’t lucifer the occurrence of past year’s “Dune: Part Two.” Its large merchandise for the quarter, Bong Joon Ho’s subject fabrication movie “Mickey 17,” starring Robert Pattinson, struggled to interruption even.

“Mickey 17” had a reported fund of $118 million, and the workplace spent millions much successful marketing. Worldwide summons income reached $132 million.

Studio revenue, which includes tv accumulation and video games, dropped 18% to $2.3 cardinal successful the archetypal quarter.

Earlier this spring, determination were reports that Zaslav was getting impatient with his movie studios enactment team.

But the workplace began its 2nd 4th with a bang: “A Minecraft Movie,” a blockbuster that has topped $875 cardinal successful planetary summons sales. Ryan Coogler’s “Sinners” followed and is nearing the $250-million mark.

“We’re going to person an perfectly astonishing 2nd quarter,” Chief Financial Officer Gunnar Wiedenfels promised analysts.

Since Zaslav and his squad from Discovery took implicit the Warner businesses 3 years ago, the institution has pivoted its strategy sharply.

Previous proprietor AT&T spent billions to motorboat HBO Max successful a bid to thin into HBO’s estimation for precocious quality. Zaslav’s squad ditched HBO from the rubric successful an effort to entreaty to a wider audience.

Executives slashed programming and instituted aggregate rounds of unit cuts.

Programmers ordered bid with broad-based entreaty similar “The Pitt,” which has been a beardown performer for Max.

The institution refused to walk large to clasp the National Basket Assn., and truthful it volition suffer those rights for its TNT transmission this fall.

“In the end, sports is simply a rental business,” Zaslav said. “We don’t privation to flood the portion .... It’s each astir harvesting our [intellectual property].”

Now, Zaslav said, the institution is focused connected producing little content. It hopes to instrumentality to an epoch erstwhile the institution was known for its high-quality films and shows from HBO and Warner Bros.

Last year, Zaslav’s compensation bundle accrued to $52 million, contempt the rocky twelvemonth for his company.