Warner Bros. Discovery‘s deal to be acquired by Paramount Skydance is supposed to create a behemoth of a company that includes everything from the CBS television network to the “Lord of the Rings” franchise. But as Aragorn said in that massive epic, today is not that day.
A large financial obligation tied to dealings with Paramount overwhelmed robust performance at Warner Bros. Discovery’s streaming and studios operations, leading the company to post a first quarter loss.
Warner needs to keep $2.8 billion in reserve following the termination of a previous deal to be acquired by Netflix. Paramount has paid that fee to the streaming giant on behalf of Warner, but the money is refundable to Paramount under certain circumstances, including a scenario under which Warner terminates the deal because it receives a superior proposal.
The deal entanglements offset hikes in revenue at Warner’s streaming and studios operations, even as the company’s large TV business saw continued erosion.
Overall revenue fell 3%, as advertising slumped by 8% due to the absence of NBA games from the company’s’ TV schedule. Warner cut ties with the basketball league last year over fees, but the games represented a substantial portion of its large-audience programming. Distribution revenues were relatively flat.
Streaming revenue rose 7%, to nearly $2.9 billion, with distribution fees up 7% and ad revenue up 19%. Revenue from production studios increased 31% to about $3,13 billion
The move of consumers from traditional TV to streaming continued to undermine Warner’s old-school TV operations. TV revenue fell 9% to about $4.38 billion, with ad revenue off by 12% and U.S. TV audiences down by 8%.
During a call with investors, Warner CEO David Zaslav said the company raised its predictions for streaming subscribers, noting that it now expected more than 150 million subscribers for HBO Max by the end of 2026.
