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Lanon Wee

Warner Bros. Discovery Sees Subscriber Loss with Max Launch, But Makes Progress on Debt Reduction

Warner Bros. Discovery's second-quarter results released on Thursday were lower than what analysts had forecasted, with the total global direct-to-consumer streaming subscribers at 95.8 million -- a decrease of almost 2 million from the end of the first quarter. Nevertheless, the business declared a tender offer geared to extinguish up to $2.7 billion in debt. Warner Bros. Discovery reported second-quarter results on Thursday that failed to meet Wall Street expectations across the board and a lower subscriber count than the previous quarter. Their total global direct-to-consumer streaming subscribers at the end of the quarter was 95.8 million, which was lower than the 96.7 million analysts had forecasted according to StreetAccount data, and a drop of nearly 2 million from the end of the first quarter. The decline was likely due to the launch of the combined Max streaming service, merging HBO content with unscripted hits from Discovery networks into one platform. During the quarter, the company managed to pay down $1.6 billion in debt and announced a tender offer for up to $2.7 billion more. This is part of the company's plan to reach investment-grade status by the end of the year. The stock rose almost 3% on Thursday. The company reported a net loss of $1.24 billion, or 51 cents per share, a significant decrease from the $3.42 billion, or $1.50 per share, in the same period last year. Revenue was $10.36 billion- 5% higher than the same period last year (4% when factoring in the merger and foreign currency). The direct-to-consumer streaming segment posted a loss of $3 million, compared to the first-quarter profit, due to the Max launch costs. Executives previously announced that they would combine the two streaming services as part of the merger of Warner Bros. and Discovery, while keeping the same pricing structure ($9.99/month with commercials, $15.99/month without ads). Warner Bros. Discovery's studios saw its total revenue decrease 8% to $2.58 billion from the year prior as their film slate was weaker than that of which included "The Batman." What's more, on a pro forma combined basis, the segment's revenue was down 23%. The CFO mentioned that "The Flash" released in theaters during the quarter was a flop, barely topping $100 million domestically. He acknowledged the success of "Barbie," which will positively impact third-quarter revenue. The networks segment was mostly stagnant at $5.76 billion, which was due to the declining number of traditional cable TV subscribers and the unfavorable ad market. On a pro forma combined basis, this segment had a 6% loss in revenue. CEO David Zaslav noted the ad market's prolonged downturn has been "unusual," with no significant recovery in the second half of the year. Comparatively, the ad-supported tier on Max has seen an increase in ad revenue, with a 25% growth on a pro forma combined basis. The company is pushing for its debt-to-EBITDA leverage to go under four times, with resulting cash flow going towards reducing debt. Cost-cutting and content-spending reductions have also contributed to the growth in adjusted EBITDA, which rose to $2.15 billion in quarter two.

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