Warner Bros. Discovery Nets $103 Million Streaming Profit in 2023, Beating Disney to DTC Profitability
Is it time for WBD CEO David Zaslav to declare victory over his doubters now that his streamers are profitable?
The Great Content Purge of 2022 was a well-publicized de-cluttering of Warner Bros. Discovery’s streaming inventory designed to focus the company’s financials on its most impactful properties. WBD CEO David Zaslav took plenty of heat for putting shows from “Westworld” to “Sesame Street” on the chopping block, as producers and others responsible for creating the content removed from WBD streaming services were justifiably angered by the moves. But they appear to have paid off, as Warner Bros. Discovery revealed as part of its fourth quarter 2023 earnings report that it had turned a $103 million profit from its streaming services last year.
- WBD becomes the first major studio to see its streaming segment turn a profit.
- Content cuts were a major part of its strategy for becoming profitable, but licensing agreements and a price increase also aided WBD.
- Most other major streamers are expected to become profitable by the beginning of 2025.
The $103 million figure is somewhat of a drop in the overall bucket for WBD, which is still tens of billions of dollars in debt thanks to the merger of WarnerMedia and Discovery in 2022. Despite that fact, achieving any level annual of profitability is still a massive achievement for any company’s streaming sector, but especially for WBD. After Discovery acquired WarnerMedia nearly two years ago, the new company was losing hundreds of millions of dollars per quarter from its streaming services, making content culling one of Zaslav’s top priorities.
WBD can now fairly claim to be the first major studio whose streamers are profitable. Netflix, of course, has long turned reliable quarterly profits, but platforms like Disney+, Paramount+, and Peacock which are owned by legacy media companies are still turning in big, though narrowing, losses every quarter.
The deep content cuts that WBD carried out in 2022 and 2023 helped the company dig itself out of streaming debt far faster than many anticipated. But those weren’t the only factors that led to the company turning a streaming profit; WBD also executed a highly successful licensing agreement with Netflix which brought more revenue and more customers to the company. WBD also increased the price of ad-free streaming on both Max and discovery+ in 2023, and though these increases were relatively modest, they helped raise the average revenue-per-user (ARPU) for WBD’s streaming services to $7.94 a $0.52 increase year-over-year. With nearly 98 million global customers, that equates to an additional $609.7 million every year.
The numbers behind WBD’s streaming success in 2023 speak for themselves, which is why so many companies seem to be copying its tactics. Disney executed a round of content cuts from Disney+ and Hulu in 2023, and Paramount Global did likewise. Both companies are also increasing the amount of content they license to other outlets; Disney recently agreed to a licensing deal with Netflix, and Paramount has sent several of its Star Trek movies to stream on Max.
Introductions of live sports and news to Max quite likely helped keep customer engagement on the platform high, driving down subscriber churn. Max first introduced news content from CNN on its CNN Max hub in September, and in October it rolled out its Bleacher Report sports add-on, which carries every sporting event that appears on TBS, TNT and truTV, as well as some streaming-exclusives. This allows Max to somewhat replicate the cable bundle, offering entertainment, news, and sports for a much lower price than a cable plan.
How Does WBD Enhance Profits Further?
Wall Street will surely take note of WBD’s 2023 streaming success, but it will have to widen its margins if the company wants its stock price to make meaningful gains. CEO David Zaslav told analysts during the conference call to discuss the earnings report that part of his “attack plan” for 2024 includes launching Max in more international markets, which should certainly increase its customer base. All of the company’s 1.6 million new customers during Q4 came internationally, as domestic subscribers dropped for the third straight quarter.
There are also more price increases coming to Max, at least according to Zaslav. The CEO said in September that there was “a meaningful opportunity” to raise the subscription cost of Max, and that previous increases were encouraging in terms of how few customers canceled their subscriptions following previous price hikes. The Bleacher Report Sports Add-On that all Max subscribers are now enjoying for free will also become a paid extra soon; Max was originally due to start charging $9.99 per month for the add-on starting Feb. 29, but that plan has been delayed for now. The forthcoming launch of a sports joint venture with Disney and Fox will serve as another opportunity for WBD to increase its streaming profits as well.
If these measures don’t suffice to boost profits even higher for WBD this year, it’s fair to assume the company will take further steps to try and enhance its margins. Ampere Analysis suggests that most of the top studio streamers will be profitable by 2025, but it’s not like Zaslav to allow the competition to get ahead of him. He’s already beaten them to streaming profitability, and he’ll almost certainly want to maintain his head.
Max
Max is a subscription video streaming service that gives access to the full HBO library, along with exclusive Max Originals. There are hubs for content from TLC, HGTV, Food Network, Discovery, TCM, Cartoon Network, Travel Channel, ID, and more. Watch hit series like “The Last of Us,” “House of the Dragon,” “Succession,” “Curb Your Enthusiasm,” and more. Thanks to the B/R Sports add-on, users can watch NBA, MLB, NHL, March Madness, and NASCAR events.