By Harshita Mary Varghese
May 6 (Reuters) – Warner Bros Discovery’s streaming unit posted better-than-expected quarterly revenue growth on Wednesday, as HBO Max’s expansion overseas boosted subscriber growth and engagement.
The company’s first-quarter net loss widened to $2.92 billion, including a $2.8 billion termination fee paid to Netflix. The fee was paid by Paramount Skydance under the companies’ $110 billion merger deal, but was recorded by Warner Bros as an obligation under the agreement.
The merged entity would have more than 220 million streaming subscribers based on current figures, adding scale to help the combined company compete better with Netflix and Disney.
Warner Bros Discovery ended March with more than 140 million streaming subscribers, while Paramount+ had 79.6 million.
The international rollout of HBO Max is largely complete, the company said.
HBO Max is “really the linchpin” of Warner Bros’ growth plans, CEO David Zaslav told analysts on a conference call. He added that the platform would be a “huge benefit” to Paramount once the merger closes.
Overall, the streaming unit posted revenue growth of 9% to $2.89 billion, compared with a 7.6% rise expected by analysts, according to data compiled by LSEG.
Total advertising revenue fell 7%, hurt by the absence of National Basketball Association content and continued declines in domestic linear TV audiences.
For the second quarter, the company expects the lack of NBA content to create a 16% constant-currency headwind to streaming advertising revenue.
“If the Paramount takeover goes as planned, PSKY-WBD will boast the strongest US sports offering outside of Disney, which could pull ad dollars back,” said Ross Benes, senior analyst at Emarketer.
The company reported revenue of $8.89 billion in the first quarter, largely in line with estimates of $8.9 billion.
(Reporting by Harshita Mary Varghese in Bengaluru; Editing by Sriraj Kalluvila and Matthew Lewis)
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