Film hits help Warner Bros. swing to profit as company restructures

Hannah Miller
 |  Bloomberg

Warner Bros. Discovery Inc., the parent of HBO and CNN, swung to a profit in the second quarter, buoyed by a string of successes at the box office.

The New York-based company posted revenue of 9.81 billion, up 1% from a year ago, in line with Wall Street’s estimate. Warner Bros. reported net income of $1.58 billion, compared with a loss of $9.99 billion a year earlier.

With more TV viewers switching from cable to streaming, Chief Executive Officer David Zaslav is unwinding the deal he did a few years ago, breaking the company into two separate entities to unshackle its streaming assets and studios business from the struggling cable division. The new Global Networks business will include entertainment, sports and dozens of cable television brands such as CNN, TNT and TBS. The Streaming and Studios company will house HBO Max, Warner Bros. Television and the movie studio.

Zaslav acknowledged that the tide had shifted for legacy media companies last year, when Warner Bros. took a $9.1 billion charge to write down the value of its traditional TV networks. After being derided for a series of missteps at Warner Bros., including an expensive Batgirl flop and losing out on lucrative media rights to NBA games, Zaslav has been somewhat vindicated with a string of successes in film this year.

The studios unit has been on a Hollywood hot streak, with chart-topping hits including Sinners, A Minecraft Movie and Final Destination: Bloodlines. Revenue in the unit rose 55% to $3.8 billion, compared with analysts’ forecasts of $3.12 billion. Adjusted earnings before interest, tax, depreciation and amortization rose to $863 million from $210 million.

Those wins contrast with continued decline at the television networks unit, the company’s biggest source of revenue, which includes CNN, TNT and TBS. Sales dropped 9% to $4.8 billion driven by a decrease in pay-TV subscribers and a drop in advertising revenue.

Like its rival Walt Disney Co., Warner Bros. is focusing on its streaming plans. The company recently renamed its streaming site HBO Max, reverting back to an earlier name, recognizing the power the HBO brand established on cable as it seeks to build up a direct-to-consumer product. Warner Bros. reported a gain of 3.4 million streaming subscribers in the second quarter, bringing the total to 125.7 million. The unit reported adjusted Ebitda of $293 million and revenue of $2.79 billion.

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