Warner Bros. Discovery (WBD) reported a 10% rise in annual streaming profits and projected a doubling of its streaming profitability by 2025, driven by global expansion and tighter cost controls. The company set an ambitious target of reaching 150 million streaming subscribers by the end of 2026, up from 116.9 million at the close of 2024. Shares of WBD surged more than 10% in early Thursday trading, as investors responded positively to the strong growth in streaming, despite an overall fourth-quarter net loss of $494 million, largely due to continued declines in traditional television and advertising revenue.
"In this generational media disruption, only the global streamers will survive and prosper, and Max is just that," CEO David Zaslav said on the company's earnings call Thursday.
The company's streaming segment, anchored by Max and Discovery+, added 6.4 million subscribers in the fourth quarter, surpassing analyst expectations of 4.9 million, according to Visible Alpha. The unit's revenue grew 5% to $2.65 billion, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose to $409 million, a sharp turnaround from the $55 million loss reported in the same period last year.
WBD projected that streaming EBITDA would reach $1.3 billion in 2025, nearly doubling the $677 million posted in 2024. The company outlined a long-term goal of achieving profit margins above 20% for its streaming business.
The expansion of Max into new international markets is expected to fuel further subscriber growth. WBD will launch Max in Australia at the end of March, followed by rollouts in Germany, Italy, and the United Kingdom in 2025. The company expanded Max into more than 70 countries across Europe and Asia last year and said its global reach still has significant room to grow. In a letter to shareholders, WBD stated that Max has yet to reach 40% of the addressable global market, positioning the service for additional growth.
Although WBD's total subscribers remain well below Netflix's 302 million and Disney+'s 124.6 million, eMarketer analyst Ross Benes said the company's goals are realistic, particularly with the expected crackdown on password sharing, which could drive additional paid sign-ups.
While streaming showed strong momentum, WBD's traditional television networks business, which includes CNN, Discovery Channel, and Animal Planet, struggled. The segment's revenue declined 5%, while advertising revenue plunged 17%, reflecting an industry-wide shift as advertisers move away from cable television to digital platforms.
WBD's studio division delivered a 15% increase in revenue, benefitting from higher content licensing fees and the easing impact of the 2023 Hollywood strikes. Zaslav emphasized that the company is focused on reclaiming its leadership in film and television production.
Thursday's earnings report was the first since WBD announced its decision in December to separate its cable TV networks from its streaming and studio businesses, a move that analysts say could position the company for a future sale or spinoff of its legacy TV business. Zaslav told analysts that this restructuring allows WBD to capitalize on market opportunities and adapt to shifts in the media industry.
Overall, WBD's fourth-quarter revenue declined 2% to $10.03 billion, slightly below analyst expectations of $10.19 billion. The company reported a loss per share of 20 cents, significantly missing estimates of a 1-cent profit.
Despite the quarterly loss, investors reacted positively to the company's strong streaming growth and future outlook, pushing WBD stock up 10% in early trading Thursday.
The company also announced changes to its news and sports offerings on Max. WBD will keep B/R Sports and CNN content available at no additional charge for standard and premium subscribers, while removing them from the basic ad-supported tier starting March 30.
Zaslav pushed back against speculation that WBD would aggressively pursue new sports rights, stating, "We don't need any more sports anywhere in the world in order to support our business." While WBD recently lost the U.S. broadcast rights to NBA games, it retains key deals for the French Open, Major League Baseball, college football, and the NHL.
For CNN, WBD executives acknowledged they expected a larger ratings boost from the 2024 U.S. election cycle, but viewership gains failed to materialize, trailing behind competitors such as Fox News.
