‘Barbie’ generated $1.5 billion in revenue for Warner Bros. Discovery, yet the company still reported a loss in the most recent quarter

Warner Bros. Discovery Narrows Losses Thanks to "Barbie" Success

The blockbuster film "Barbie" generated an impressive $1.5 billion in global ticket sales, providing a significant boost to Warner Bros. Discovery's quarterly results. Despite this, the company still posted a quarterly loss of $417 million, which was greater than analysts had anticipated.

When factoring in adjustments for items such as interest, taxes, depreciation, and amortization, Warner Bros. Discovery did manage to report a slim profit.

As the parent company of CNN, Warner Bros. Discovery relied heavily on the revenue surge from "Barbie" to achieve a modest 2% uptick in overall sales, bringing total revenue for the quarter to just under $2 billion.

The film's strong performance at the box office helped counterbalance a $235 million decline in advertising revenue within the company's networks division, representing a 12% drop. Additionally, the company faced further revenue declines attributed to the prolonged strikes by the Writers Guild of America and SAG-AFTRA, which brought much of the entertainment industry to a standstill for several months. While the writers' strike has ended, SAG-AFTRA remains on strike, and negotiations with studios and streaming platforms are ongoing.

Back in September, the company projected that the strikes could reduce annual earnings by as much as $500 million. Chief Financial Officer Gunnar Wiedenfels cautioned investors that the financial repercussions of the strikes could extend into 2024, and he also noted the potential for continued weakness in advertising revenue in the coming year.

Chief Executive David Zaslav acknowledged that the strikes forced the company to postpone some releases, resulting in one of the lightest original content lineups in recent years for the third quarter. However, the company did not provide updated estimates regarding the total financial impact of the strikes.

“This is far from an exact science,” Wiedenfels remarked.

During a call with investors, Zaslav expressed optimism about resolving the SAG-AFTRA strike soon, emphasizing the importance of ensuring creative partners feel appreciated and fairly compensated. He added that the company looks forward to resuming the creation of compelling stories once negotiations are settled.

Loss Per Share Exceeds Expectations

Although Warner Bros. Discovery's net loss improved compared to the $2.3 billion loss reported in the same period last year, its loss per share was 17 cents—significantly higher than the 6-cent loss per share that analysts had predicted.

The company reported that adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) rose by 22% to nearly $3 billion. However, this measure of profitability declined in both the networks and studio segments, despite the strong showing from "Barbie."

Streaming Division Returns to Profitability

Warner Bros. Discovery's streaming services delivered another profitable quarter, with adjusted EBITDA swinging to a $111 million profit from a $634 million loss a year earlier. This turnaround occurred even as the number of global subscribers fell by 700,000 to 95.1 million. The improvement was driven by higher subscription fees and a 29% increase in advertising revenue.

The company had previously reported its first-ever streaming profit in the first quarter of the year, but slipped back to a narrow loss in the second quarter. While Netflix remains consistently profitable, most streaming platforms operated by traditional media companies or Apple have yet to achieve steady profits.

Following the earnings report and warnings about ongoing strike-related challenges and a sluggish advertising market in 2024, Warner Bros. Discovery shares dropped nearly 16% in morning trading.