The Zhitong Finance App learned that Warner Bros. Exploration (WBD.US) revenue fell sharply in the second quarter, mainly hampered by the loss of broadcasting rights to NBA games and poor movie box office performance.
The group, which owns HBO, TNT, Cartoon Network and CNN, revealed on Thursday that second-quarter revenue fell 11% year over year to US$8.7 billion, lower than market expectations of US$9.2 billion; adjusted EBITDA fell 4% yoy to US$1.88 billion, in line with market expectations; and earnings per share were 0.06 US dollars, better than market expectations.
Streaming growth has failed to offset the decline in traditional businesses
Revenue from Warner Bros.'s largest business, the television network business, fell 17% year over year to $3.99 billion. Due to the suspension of NBA games and the weakening of overall ratings, advertising revenue plummeted 27%. The business's EBITDA fell 4% year over year to $1.45 billion.
Revenue from the film and television production business plummeted 39% year over year to US$2.3 billion, partly due to falling sales of TV shows and movie tickets; the business's EBITDA plummeted 89% to US$96 million. Movies released such as “Mortal Kombat 2” and “Supergirl” failed to replicate last year's box-office hit “My World Movie.” Warner's key films of the year are concentrated in the second half of the year, and blockbuster new films such as “The Digger” and “Dune 3” are expected to boost box office performance.
The streaming media business remains a major highlight. Revenue increased 10% year over year to reach US$3.08 billion; the EBITDA of this business increased 75% year over year to reach $512 million. The international expansion of HBO Max and original content such as “Pittsburgh Healthcare Frontline,” “Excited,” and “Dragon Family” have boosted the number of subscribers.
The streaming business is also at the core of Warner Bros.'s $110 billion merger deal with Paramount Sky Dance (PSKY.US). The integration of HBO Max and Paramount+ platforms is expected to better compete with streaming giants Netflix and Disney.
The $110 billion merger deal is pending
Following conditional approval from the European Union last month, the deal once again ushered in important regulatory developments: the UK Competition and Markets Authority (CMA) approved the deal on Thursday, judging that it would not hurt competition in the UK market. The CMA issued a statement saying, “Available evidence shows that after this transaction is completed, Paramount will still face sufficient competition in business tracks such as film and television production and distribution, children's channel supply, and streaming services.”
But the deal still faces legal hurdles in the US. A California federal judge has scheduled a 12-day trial to begin on March 2, 2027 to determine whether the deal violates antitrust law. Twelve states, led by California Attorney General Rob Bonta, have filed lawsuits arguing that the merger of Paramount and Warner Brothers would damage competition in film and television production and distribution. Paramount has agreed to suspend the deal until June 2027.
If the deal is not completed by September 30, Paramount will pay Warner Bros. shareholders of $650 million in quarterly late fees until the merger is finally completed. If the acquisition fails, Paramount will have to pay Warner Bros. $7 billion in termination fees. The expenses will be borne by the family of Paramount CEO David Ellison, whose father is billionaire Larry Ellison.
As of press time, Warner Bros. Exploration was up 0.7% in the premarket, and Paramount was up 0.23%.