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Warner Bros. Discovery is a global media and entertainment conglomerate with three main segments: studios, networks, and direct-to-consumer. These divisions produce, distribute, and license films and television programs; manage domestic and international TV networks and streaming services; and handle themed experiences and interactive gaming. The company owns an extensive portfolio of intellectual properties such as Batman, Superman, and Wonder Woman, as well as franchises including HBO Max, DC Studios, and Discovery Home Entertainment. In June 2025, the company announced plans to split into two publicly traded companies: one focused on streaming and studios; the other on global networks.

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Warner Bros. Discovery (WBD): Company Profile, Stock Price, News, Rankings

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Warner Bros. Discovery

warner bros. discovery

Ladies and gentlemen, welcome to the Warner Brothers Discovery Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participant lines are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Additionally, please be advised that today's conference call is being recorded. I would now like to hand the conference over to Mr.

Andrew Slabin, Executive Vice President, Global Investor Strategies. Sir, you may now begin.

Good morning, and thank you for joining us for Warner Bros. Discovery's Q4 earnings call. Joining me today is David Zaslav, President and Chief Executive Officer Guna Videnfels, Chief Financial Officer and J. B. Perret, CEO and President, Global Streaming and Games.

Earlier this morning, we released our Q4 earnings results, trending schedule as well as accompanying shareholder, Lennar. We will begin this morning with some very brief remarks by David and then turn the call right to Q and A. Today's presentation will include forward looking statements that we made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward looking statements may include comments regarding the company's future business plans, prospects and financial performance and involve risks and uncertainties that could cause actual results to differ materially from our expectations. For additional information on factors that could affect these expectations, please see the company's filings with the U.

S. Securities and Exchange Commission, including but not limited to the company's most recent annual report on Form 10 ks and its reports on Form 10 Q and Form eight ks. In addition, we will discuss non GAAP financial measures on this call. Reconciliations of these non GAAP financial measures to the closest GAAP financial measure can be found in our earnings release and in our trending schedules, which can be found in the Investor Relations section of our website. And with that, I'm pleased to turn

Good morning, everyone, and thank you for joining us. Two point five years ago, when we brought Warner Bros. Discovery together, our vision was to combine Discovery's leading position as a global force in media and entertainment with local content and local sports alongside the iconic storytelling brands IP and libraries of Warner Brothers and HBO. This powerful combination is a unique compelling offering that we believe would resonate with consumers worldwide.

It was the strategic guts of our transaction. Our direct to consumer business ended 2024 with about 117,000,000 subscribers across more than 70 countries and we still have nearly half the world to go with many key markets like The UK, Italy, Germany and Australia launching over the next few years. We added about 6,500,000 subscribers in the fourth quarter and and nearly 20,000,000 subscribers in less than a year. Max continues to grow at a powerful pace, and we expect it to continue throughout 2025 and beyond. In this generational media disruption, only the global streamers will survive and prosper, and Max is just that.

With the launch of Max internationally in 2024, we now have a global subscription business that is growing subs, revenue and EBITDA. We have a clear demonstrable path to at least 150,000,000 subscribers by the end of twenty twenty six, fueling further revenue and EBITDA growth. Max is one of the world's very few global and profitable streaming services. Our direct to consumer business contributed almost $700,000,000 in EBITDA, a $3,000,000,000 improvement in just two years. And we expect direct to consumer EBITDA to nearly double in 2025.

As I mentioned in our last earnings call, we are laser focused on getting our studios back to a place of industry leadership and generating $3,000,000,000 or more in EBITDA. We are showing growth and real strength in our Warner Bros. Television business, which I believe is the highest quality and largest maker of TV content in the world. We are excited about our studio's creative and financial outlook this year and beyond, particularly all that's coming from Warner Bros. Pictures and DC Studios, kicking off with the release of Superman this July.

Despite the headwinds facing linear television, we recently struck a flurry of multiyear renewal agreements with five of the six largest ATV providers in America, many of which were a year early and all of which commanded overall rate increases. These long term deals provide real security and stability to our linear business. Finally, we have been hard at work and have made real progress implementing the reorganization we announced in December, which went into effect on January 1. This new structure will provide investors with better visibility to the strength of our Streaming and Studios business and will give us real strategic value and optionality into the future. 2024 marked a year of significant progress in transforming Warner Bros.

Discovery, laying the foundation for what's next and positioning us as a global media leader committed to providing shareholders with sustainable future growth. We remain fully focused on enhancing shareholder value and welcome your questions.

Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Jessica Reif Elric with Bank of Securities. Your line is now open.

Thank you. Good morning, everybody. Two questions, please. Can you give us an update? David, you just alluded to the restructuring, taking place as of January 1.

Can you talk about potential longer term more transformative actions? And then secondly, in the shareholder letter, there was a comment on near term linear pressure. As you add, drop to consumer and greater packaging flexibility, can you flush that out and maybe discuss the long in 2025, will there be consolidated growth?

Morning, Jessica. This is Gunnar. Let me take those two. Starting with the corporate restructuring, so this has been a real priority for us and we've made great progress. As we said in the letter, we have implemented that new structure effective January 1.

As you would imagine, there's still a lot of project work underway to manage and implement the financial aspects of the reorganization. We would still have some processes run out of the wrong entities, tax implications, etcetera. So we're still working through that with a lot of focus and we're making great progress. And as I said as we said in the letter, we're hoping to wrap that up really within the next few weeks. The point that I want to

So I would just add that I think this restructure creates real visibility to the strength of our studio and library and global streaming business. It allows us to we'll be better able to respond to this generational disruption. The new structure will enhance our strategic flexibility and also create potential opportunities to unlock additional shareholder value, which we're focused on. And we're also focused on executing our strategy while ensuring we're able to take advantage of broader market opportunities as they arise. In this disruption, we expect that there will be.

Great. Yes. Last thing I was going to add, Jessica, is we don't think from today's perspective that we're going to see a dramatic change to our segment reporting, but we are planning to provide incremental guidance beyond that to create more clarity on the global linear networks on the one side and then streaming and studios. Think of it as sort of a soft consolidation. And based on the progress we're making, I'm hopeful that we'll be able to provide that as we report first quarter earnings.

And then on your point about linear pressure and packaging flexibility, look, I think I want to take a step back. The work that our affiliate team has done in 2024 is just absolutely unbelievable. Working through all these agreements ahead of schedule and securing rate growth in the current environment, I think is a remarkable accomplishment.

And it takes us it gives us a different cadence having started as a in the distribution side of the business. Normally, you would have your deals coming up 20% a year, so you're always facing that on that either opportunity or uncertainty. In all of my experience, we've never had this secure of a base where almost all of our deals are done with increases with all of our channels carried for a period of years that gives us, I think, a real advantage as we go and it takes one issue off the table for us.

And as we look forward, the one thing I would want to call out, we've seen pretty strong rate increases in the prior year. I mean, in Q4, close to 6% rate increases in our domestic affiliate business. With the new set of deals, those rates, those rate increases are going to be slightly slower, more in the low single digit versus mid single digit rate. But as we laid out, we have also as an industry, I think come together and created some flexibility that will drive the sustainability and longevity of that ecosystem. And then specifically when we look at the international part of our business, it's really remarkable, how across our international footprint in the aggregate, we are already seeing positive net revenue impact from our affiliate renewals.

What does that mean? In many of these renewals, we're working together with our affiliate partners to make some concessions on the linear side where they're facing not as pronounced but similar pressures as domestically here, but we're cooperating through software hard bundles on the B2C side. And net net in the aggregate we're growing across our international affiliate portfolio we're up in revenues. That's the kind of crossing of the lines that we're looking for. We're not there in The U.

S. Yet, but it's a great proof point that we're seeing that strong value and demand for our content internationally already leading to consolidated growth.

Your next question comes from Robert Fishman with MoffettNathanson. Your line is now open.

Hi, good morning. Two for you guys. As you think about the importance of scale in DTC, curious that does Max have enough diversity in programming as a standalone service to compete with those larger SVOD platforms? Or maybe asking it differently, any updated thoughts on whether the smaller streaming platforms ultimately need to consolidate? And then on a related note, when you think about the strategy to use sports and news on Mac, pulling that content from the ad tier, I think, yesterday.

Can you talk more about how you plan to explore ways to evolve the sports and news distribution ecosystem? Thank you.

Thanks, Robert. We really see our offering as unique, and there are very few global streaming services. And the kind of demand and consumption that we're seeing around the world is quite compelling and it's really driven by the quality of the original storytelling, whether it's White Lotus, House of the Dragon, The Pit, together with the great library of content that we have and the great IP and motion pictures. But you add that to the fact that we have twenty, twenty five years of entertainment content from our free to air channels, cable channels around the world and sports, it's really the quality package of content you really want to see, which includes even things like Friends and Big Bang Theory. It's got a great menu.

It's distinguished from others because in addition to that very high quality, you also have meaningful

And so and that is also driving not only consumer interest, but distributors' interest in the product. So we feel really good about where we are. J. B, talk a little bit about our news and sports strategy because it differs in The U. S.

Yes. Robert, I think both on the diversity point also, we've never gone into a period, as we look out the next two years and frankly well into 2027 at this point, where we feel better about the lineup, the consistency, the strength. So on our note, we have 15 franchises returning that have been in our top 20 of all time. So, we feel really good about the content lineup coming and the diversity of that content lineup over the next two plus years. On the sports and news front, we recognize and we've said, I think, fairly openly that we're continuing to experiment on what the right model is.

And the reality is we have a variety of different models in operation around the world. In The U. S, as you rightly point out, we announced yesterday we're moving, sports and news out of the ad light and into the premium and standard ad free. In Latin America, we have it across all of our packages. In Europe, we up

as a add on and a buy through. And so, we're openly continuing to experiment as to what the right model is and what the best way is to both drive engagement and first views or acquisition through that powerful content, but at the same time make sure we're figuring out a business model that works. And we're going to continue to experiment and see what works. And we have the beauty of a global footprint with rights across the world that we can experiment with.

And one of the things that we've pivoted on is Mark Thompson and Alex McCaleb, who the two of them built the digital business at The New York Times, we see that as an opportunity to build a completely separate digital and subscription line of businesses. And over the next few months, they'll be out talking to you about how they're taking advantage of CNN as the largest digital news brand in the world, the most trusted news brand in the world with over 150,000,000 people coming every month and how they're going and what we're doing to build a sustainable digital business out of that. But when you look at the overall question of what are we, we said three years ago, it's not how much, it's how good. And that has been our focus. So in Europe, when we have sport, we have the best sport.

And what we're going out with the highest quality content. And so that is KC and Channing and Mike and Pam, the focus is, and Gun, not how much, it's how good for this streaming service.

Okay. Let's move to the next question please.

Your next question comes from Kanan Venkateshwar with Barclays. Your line is now open.

Thank you. Maybe a couple. First one on strategy. David, if you could just outline how you see the asset landscape right now. Obviously, there's a lot going on in the industry with different objectives.

But in this environment, do you see yourself as a buyer or a seller? I mean, is there an opportunity to maybe become the consolidator and do some kind of a bigger spin off of networks? So your thoughts on that would be useful. And Gunnar, just to follow-up on Jessica's question on the full year, when you have easier comps on studios this year and if you just look at Networks, despite the headwinds, if you just take the same trend line as this year into next year, and then DTC profitability that you guided to, it would imply that you should grow EBITDA in 2025. So is there something that takes away from that algorithm?

It would be great to get your thoughts on that. Thanks.

I guess fundamentally, when you look at the marketplace, we really believe that the global players will be those that will really prosper in the years ahead. And ultimately, the largest sustainable growth media companies, they'll probably be four or five and or six. And our job every day is to fight to get a seat at that table. And we feel that we've made real progress now in with our global streaming service and the global appeal of all of our content and the consumer reaction to assure that seed. The consequence of that, I think, is there's more and more pressure on regional players.

Can they build their own platform? Do they have enough local content? One of the things that we're seeing now is we've been talking about bundling for two point five years, but many of the really high quality local players have come to us now after two or two point five years and aligned on this on our strategy, but better together. So whether it's Globo in Brazil or Televisa in Mexico or all across Europe, Players coming to us. And I expect that that's going to happen.

There'll be a few global players. There may be some consolidation in getting there. But the consolidation may simply come with bundles. And the bundles as opposed to just being an economic bundle will be a consumer friendly bundle where you can move between content from one to another. And I think we're going to be a very, very attractive player.

We're already having a number of discussions and we'll just have to assess how strong we are alone and who and when we need. In the end, we'll always do what's right. We're a public company. We're always going to do what's right for shareholders. But JB, this idea of bundling because we're this is something we're attacking regularly.

David says, there are two forms of reaggregation. There's a structural one, which is what David talked about. And then there's a commercial one, which is bundling strategy. And we've seen great success with it, obviously, here in The U. S.

With Disney, seeing it both drive acquisition as well as significantly reduce churn. And To the earlier question that Robert had about diversity, the reality is the industry has gone from a model in the twenty ten to twenty twenty period of everybody trying to do everything, and frankly a glut of content and an overspend to a much more rational spend where we've gotten all back to doing what we're really good at and providing consumers access to all that goodness through these bundles. And so, I think that is a commercial path to getting a lot of the value and we're seeing it happen already. And as David said, the good news is people are seeing that and it's gaining a bit of a momentum across the world, not just with global players, but frankly with regional and local players as well. And so we think that's an exciting new growth factor for us as well.

And sports will be a pressure point. Some regional players are becoming more and more dependent on sports and rental sports. And the ability to really build a long term platform on short term sports rights has not been a good story in the past and it's unlikely to be a good story in the future.

And then, Kedan, on your financial follow-up. Look, as you saw in the letter, we're not intending to give consolidated financial guidance this year as we did in the prior year as well. But we have a lot, and I'll just recap some of the points we put in there and give some additional context. So starting with B2C, you saw the $1,300,000,000 EBITDA target, very achievable from our perspective. And importantly, having gone through a $3,000,000,000 swing over two point five years here in profitability, I do think we have now earned the flexibility here to make trade off decisions, get behind what's really working, fuel further growth or optimize for profitability where we don't see those opportunities.

So I think that's a pretty specific guidance that you can model. On the studio side, you're right. We do have a lower comp in 2024. We talked about the limited avails for content licensing in the prior year. That's obviously getting better.

We have a humming TV production business, which we expect to continue growing and improving in profitability. Channing's team is already doing a phenomenal job. And then, JB, you may have seen the restructuring of the games unit that JB has implemented towards the end of last year. So with that, we should be in a much better position in 2025 as well. And then I also believe that our film slate has a greater balance.

And as we've discussed multiple times, we should be with the process rigor we have implemented, we should be doing better financially both in success and in the inevitable misses that you have to expect with a head driven business as well. So in a nutshell, Studios, certainly very significantly better in EBITDA of this year than in the prior year. And then the third point obviously is the network business. And I don't want to create the wrong impression here. That business continues to face challenges.

We have seen a weaker ad sales result in Q4 than what we had hoped for, what we had expected, frankly. We didn't expect a ton of political advertising, but CNN, we had hoped for a greater benefit from the elections, which didn't come in. Now going into the first quarter, we see some mild positive signals from the ad market. It's not a sea change, but we're seeing less upfront cancellations than in the prior year. We're seeing a scatter CPMs up moderately.

But we also acknowledge that we have some work to do in terms of our linear portfolio ratings and delivery. Channing has taken over that business as an additional responsibility, has put the team in place. There are a lot of content initiatives that are underway. Some new shows bailing out loud over the TLC, the team that's delivered so many hits in the past is doing very well. And then the thing that I'm most excited about is that Channing with her vast knowledge of the deep library at Warner Brothers and HBO is going to implement a strategy of much more efficiently utilizing those libraries.

That's always been one of the core ideas from a synergy perspective here. So hopefully, we'll be seeing some progress there as well. So, and then I called out on the affiliate side the fact that we're going to we're expecting to continue to see quite too early to expect a leveling offer or a significant moderation, slightly lower rate increases than in the past. We do have a great sports portfolio. And again, I'm very, very happy with how that sports strategy has been implemented over the past few years.

And but that does mean that we're seeing some incremental expense in 2025, importantly, expense that will come back out in 2026. Because remember, we have a half a season of the NBA this year, and that was a significant chunk of expense. And 2025 is only suffering a little bit on the expense side from having that expense plus the cost of the new rights. So we'll see a very significant improvement as we come out of the year into 2026. Other than that, we will continue to be very, very focused on costs.

It continues to be a huge priority for the team, albeit obviously now from a basis of a cost structure that's already been improved very significantly over the past few years. And then comment I'll make is on the international side. We continue to see trends in the linear market that are much better than domestically, not in the aggregate growing, but a much more moderate pressure there, even though in the current geopolitical environment, we have to acknowledge that there's some uncertainty there as well. So that's the reason why we're not out here with a firm, hard number for that business or the company in the aggregate. But look, we're making phenomenal progress in the transformation of our business.

And the intention here is obviously to have those lines cross. And we see so much opportunity in B2C and the studio businesses. And we have no doubt that we're going to cross the lines at some point, but I'm not putting a time stamp on it.

Your next question comes from Kukthane Maral with Evercore ISI. Your line is now open.

Good morning and thanks for taking the question. I want to ask about free cash flow and the balance sheet. Gunnar, I know you just mentioned that you're not providing explicit consolidated guidance and walk through the moving pieces and the uncertainty ahead. So forgive me for

you could expand on the free cash flow outlook for the year, particularly with the moving pieces across working capital? And I ask in part to get a better sense of where net leverage can move to from 3.8 times today because it seems like we could see a healthy year of deleveraging ahead, but I can't really tell what the EBITDA commentary is. So I would appreciate your perspectives.

Sure. As you know, free cash flow has been one of our top priorities from perspective, the most important metrics. And we have really changed the entire company's mentality here. This was not a fact anyone looked at three years ago and we have a pretty well oiled machine now. And that's one of the reasons why we continue to put up these strong cash conversion rates, even with some top line pressures, especially on the linear side.

The balance sheet, I think is in very good shape now. By the end of this quarter, we will have paid down $19,000,000,000 of debt since closing the transaction. And we will continue to be super, super focused on this. At the same time, I also want to reiterate, I'm not worried about any maturities. I view our capital structure as a real asset.

The terms that we locked in between the rates and the maturity profile are an absolute strategic asset for this company. So we'll continue to focus on bringing that debt down further. I continue to believe that 2.5 to three times is the right leverage target for this company. But it's not the be all end all end all be all I think that is a target of this company. And specifically for free cash flow in 2025, again, we're going to continue to focus on it.

Talking through some individual building blocks, we want to continue growing content investments, albeit with continued improvement of our ROI against those investments. And I see evidence of that every day. Moving further through the free cash flow walk, Working capital will be strong again in 2025. We did have a good result in 2024 even though there was a drag of almost $500,000,000 from paying down some of our securitization facility opportunistically, which I don't expect to happen in 2025. We'll obviously benefit from lower debt load and corresponding interest payments.

We are going to see a little more CapEx as we expand our production footprint predominantly in Leifton, expanding our capacity there. And restructuring expenses are going to continue to come down. But to your point, the actual dollar amount in the end is going to be mostly driven by the resulting final EBITDA number, of course.

Your next question comes from Rich Greenfield with LightShed. Your line is now open.

Thanks for taking the questions. I've got a few, but hopefully they're quick. Given your comments about sports costs that penalize '25 until the NBA ends after the first half, how should we think about the net sports cost savings for '26 versus '25? Disney's also,

of goes to JB's commentary, Disney's dropping a whole bunch of sports. You're probably gonna have half the UFC available, all of F1 and, Sunday Night Baseball is obviously now available. But it doesn't, given you're renting sports comments, should investors assume that you don't have interest in any of those sports rights at the moment? And then just finally, to follow-up on the earlier question on your new affiliate deals, do you get any type of minimum penetration guarantees for Max when you included as a wholesale as part of these packages? I know you used to get minimum penetration for your cable networks.

Thanks, Rich. Look, we like sports, but we're very disciplined and we're opportunistic. So we're money good on almost all of our sports in this company. And we worked very hard to build our free cash flow, our EBIT to pay down debt. And I think the critical element for us as we look at our streaming service is the quality content, the movies, the series that Channing, and Casey does.

That's the leading edge of what consumers and our library, that's the leading edge of the value equation. And we own that. So when we launch Harry Potter in a year or a little over a year, we'll have ten consecutive years of Harry Potter and be able to advertise that globally around the world. That kind of investment also pays off in merchandising in our smaller theme oriented parks. And so, our focus is let's really spend economics on where we can get the best return.

So there are sports rights that are that we can look at opportunistically and say we can make a real return on. But we are we don't need any more sports anywhere in the world in order to support our business. We would buy sports in order to if we think it would enhance our business. And it's going to get more difficult, some of those prices being paid and some of the competitors are opting to go to sports instead of doing what we do because what we do is long cycle, it's hard and it's not easy to do what Channing and Casey and Mike and Pam and James Gunn does. So when I see a real push to pay a lot more for sports to get effective, guaranteed audiences or an audience that you could really model versus building it on great IP like Batman or the Penguin or I think that's a good thing for us because that's where we're going to really build the value and that's what we build our brand around.

And then Rich on the penetration and carriage commitment question, a couple of things. One is, it's not a one size fits all. And globally, we have a variety of different models in play. The second is, obviously, we're doing soft and hard bundles. In the soft bundles, obviously there's no penetration or carriage commitments.

In the hard bundles, there's plenty that do have carriage for penetration commitments, and then there's others that don't. So it's really kind of a mixed bag. It's hard to say it's one particular model, but we certainly do in a variety of cases do have obligations and commitments. And that's part of what we obviously the reasons we pursue them is that we do have carriage commitments like we've done in The UK with Sky, like we've done in other markets across the world where the partner is agreeing to distribute it to a fixed number of their subscriber base. So

How much is the $26,000,000 I'll just add one last thing on the sports side to be specific. We will see several hundred millions of dollars of sports expense come out in 2026. To be fair, there will be some associated ad revenues as well, but this should be a sort of, you know, certainly a few hundred million dollars improvement in 2026 over 2025.

Your next question comes from Mike Ng with Goldman Sachs. Your line is now open.

Hey, good morning. Thank you for the question. I just have two related to DTC. It's encouraging to hear about the 150,000,000 plus subscriber target by the end of twenty twenty six. Of that, roughly 35,000,000 subscriber growth over the next two years.

Any thoughts on how much is domestic versus international? Sounds like the comments around the international launches and the hard bundles, it seems like it's more international, but just wanted to get your thoughts around that. And the related ARPU pressures because of these growth drivers, is that more of a comment around ARPU potentially being flattish from here? Or could we actually see ARPU down a little bit before normalizing and returning to growth? Thank you.

The U. S. Is a pretty mature market. We think that there's still some growth, given the quality of our service, and we're fighting for that. A lot of the growth may come from price as we play around with the quality of what we're providing versus the cost of what we're providing, as well as how many people in a home can use the service and that will be rolling out.

But this idea of a global media company and a global streamer and being able to scale, that's the point that we're pushing on right now on an open door. And that's where we think when we look around, there's not a lot of players playing that game. So J. B?

I mean I think Mike a large proportion of the growth will come from international just because again as David mentioned, we've got a material footprint outside The U. S. That we're not even reaching yet. And so that international growth will come from launching in new markets as well as penetration growth. So that's the answer on the first question.

On the ARPU question, you will see some deterioration in the ARPU in the near term. But again, it's at this point of our expansion, particularly given that you think about things like our Adlight offering prior to about fifteen months ago, it was only available in one market. It's now available in over 45 markets. That's taking time as we go with a lower priced ARPU or price in some of these markets and build up the advertising revenue stream, that will take some time. As we launch international markets in Asia, which is a region that has generally lower ARPUs, you'll see some obviously continued pressure that comes from that.

And then as we do recognize that trying to get the product in the hands of more people more quickly is a priority, as we do these attractive, hard bundle deals to where we do give up a little bit more on pricing to get immediate scale and distribution, that will as well. So you will see that pressure go on, but we'll continue to manage the business smartly in terms of looking at our subscriber acquisition cost and balancing that with the right LTV profile. And we think there's a lot of room still to lean into that equation based on the numbers we're seeing. So, and medium to long term, we're very confident we can get back to ARPU growth even after this expansion period here over the next sort of twelve to eighteen months.

Your next question comes from Ben Feinburn with Morgan Stanley.

Warner Bros. Discovery (WBD) Q4 2024 Earnings Call Transcript

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