David Zaslav
Anjali Sundaram CNBC
Shares of Warner Bros. Discovery fell on Tuesday after the company warned that its profit for 2022 will be lower than expected in light of the “messy” combination of assets.
Chief Financial Officer Gunnar Wiedenfels said during the company’s first conference on earnings since the merger of WarnerMedia and Discovery that “unexpected projects” and lower operating profits and cash flow for WarnerMedia for the first quarter led to new directions.
“Operating profit for the first quarter and cash flow for WarnerMedia were clearly below my expectations,” said Wiedenfels. “I currently estimate that WarnerMedia’s share of our baseline profit for 2022 will be about $ 500 million lower than I expected, with positive compensation of several hundred million dollars from Discovery of the combined company.
Shares fell more than 7% to trade around $ 19.90 per share in early morning trading.
While Wiedenfels declined to name the unexpected projects, one is CNN +. The new CEO of Warner Bros. Discovery David Zaslav decided to turn off WarnerMedia’s new streaming service last week, less than a month after it launched. WarnerMedia plans to spend hundreds of millions more on the service.
“Rule or not, management has decided to invest a large part of the incoming funds in a number of investment initiatives,” said Videnfels. “As I look under the hood here, again CNN + is just one example and I don’t want to go through a list of concrete examples, but there are a lot of big investments that lack what I would consider as a solid analytical, financial basis and meeting obstacles. return on investment, which I would like to see for large investments. “
Warner Bros. Discovery reported a 13% jump in revenue and steady growth in streaming subscribers for its first fiscal quarter on Tuesday. The results do not include the performance for the first quarter of WarnerMedia, which Discovery bought this month.
Here are the key numbers:
- Earnings per share: 69 cents, up from 21 cents in the first quarter of last year
- income: $ 3.16 billion compared to $ 2.79 billion in the first quarter of last year
- Discovery Streaming Clients: 24 million, which is 2 million more than in the previous quarter
The recently merged Warner Bros. Discovery, the result of the merger of WarnerMedia and Discovery, which ended on April 8, debuted as a pure gaming media company that investors can compare to Disney, Netflix and Paramount Global. Zaslav hopes to show Wall Street that the company’s new assets, including HBO Max and Discovery + streaming services, can compete globally for market share against the world’s largest entertainment companies.
“We are putting together a strategic framework and organization to manage our balanced approach to growing our business and maximizing the value of our storytelling, news and sports,” Zaslav said in a statement. “I could not be more excited about the great opportunity before us.
The combined company WarnerMedia-Discovery has a market value of over $ 48 billion.
Streamline streamlining
Zaslav took his first steps toward streamlining the company last week when he shut down CNN + just weeks after it launched.
Zaslav plans to combine HBO Max and Discovery + in a bundled streaming service. The company has not announced whether the new combined product will be renamed or when this change will occur.
Executives said they would not hesitate to take action, citing their decision to shut down CNN + in just a month as an example.
Prior to these efforts, Discovery began halting promotion around Discovery + in the first quarter. The company said sales, general and administrative expenses fell 25 percent during the period, mainly due to lower marketing costs for Discovery + compared to last year’s launch.
Warner Bros. Discovery said it added 2 million streaming subscribers to Discovery during the quarter for a total of 24 million. This is in line with the added 2 million in the fourth quarter.
Last week, AT&T said HBO and HBO Max had 76.8 million subscribers at the end of the first quarter of 2022. The announcement marked the last time WarnerMedia will be part of AT&T’s revenue statement.
WATCH: Why CNN + is shutting down