Warner Bros. Discovery (WBD) has reported a substantial net loss for the first quarter of the fiscal year, a figure significantly impacted by acquisition-related expenses and restructuring costs. The company announced a net loss of $2.9 billion for the period, a stark contrast to the $453 million net loss recorded in the same quarter of the previous year.
This considerable loss is largely attributable to several one-time charges. The company booked $1.3 billion in pre-tax expenses, encompassing amortization of intangible assets related to acquisitions, the step-up in fair value of content, and restructuring initiatives. Additionally, the net loss includes a $2.8 billion termination fee that Warner Bros. Discovery owed Netflix.
The termination fee arose after Netflix's proposed acquisition of WBD's assets was terminated in February. Netflix had initially pursued a deal, but ultimately withdrew its offer when Paramount Global and Skydance Media presented a higher bid for WBD. As part of the agreement with Paramount Skydance, Warner Bros. Discovery is obligated to pay this termination fee to Netflix.
However, the financial arrangement stipulates that this fee is refundable to Warner Bros. Discovery under specific conditions, such as if Paramount Skydance were to terminate their own deal for a superior offer. Consequently, the financial obligation remains on WBD's books until the Paramount Skydance transaction is finalized.
Shareholders of Warner Bros. Discovery approved the proposed acquisition by Paramount Skydance in April. The deal is currently undergoing a regulatory review process. Paramount Global indicated in its recent earnings release that substantial progress has been made toward closing the transaction, with an anticipated completion in the third quarter.
Despite the significant net loss, Warner Bros. Discovery reported a slight decrease in overall revenue for the first quarter, which stood at $8.89 billion, down 1% year over year. On a more positive note, the company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) saw a 5% increase, reaching $2.2 billion.
The company's streaming segment continued to demonstrate strength. Total streaming revenue climbed 9% to approximately $2.89 billion. This growth was fueled by an increase in subscriber revenue, particularly from the international expansion of HBO Max, WBD's primary streaming platform. Advertising revenue within the streaming unit surged by 20%, driven by a higher number of customers opting for the ad-supported subscription tier.
Warner Bros. Discovery also announced that it surpassed its guidance for global streaming customers, exceeding 140 million by the end of the first quarter. The company remains on track to achieve its year-end target of more than 150 million global subscribers.
Conversely, the company's traditional pay TV networks, which include well-known channels such as CNN, TBS, and the Discovery Channel, continued to face challenges. Revenue from these linear TV networks declined by 8% year over year, totaling $4.38 billion. The company attributed an 11% drop in linear advertising revenue primarily to the absence of NBA media rights from its programming portfolio.
In contrast, the film studio division experienced a notable rebound, with revenue increasing by 35% to $3.13 billion compared to the prior year, indicating a strong performance in film production and distribution.
