Warner Bros. Discovery revealed its second-quarter results -- its first quarterly earnings since the $43 billion merger.
The total number of direct-to-consumer subscribers across HBO, HBO Max and Discovery+ was 92.1 million in the second quarter of 2022, up 1.7 million from the end of Q1 with 90.4 million subscribers. The company did not break down the over-the-top streaming services' numbers individually, so it's unclear what the exact number is in terms of HBO Max and Discovery+ subscriptions.
The company also reported a loss of 300,000 domestic subscribers, a decrease from 53.3 million to 53 million.
In the prior quarter, WarnerMedia had reported a combined 76.8 million HBO and HBO Max subscribers and Discovery+ had 24 million. The total topped 100 million subscribers. The discrepancy with today's numbers is due to how the previous owner, AT&T, had counted wireless customers on plans that bundled HBO Max.
When announcing Q2 results, Warner Bros. Discovery wrote in its letter, "The new definition resulted in the exclusion of 10 million legacy Discovery non-core subscribers and unactivated AT&T mobility subscribers from the Q1 subscriber count."
During its earnings call, the company disclosed that the upcoming combined streaming service will launch in the U.S. in the summer of 2023, with Latin America to follow that same year. It will rollout in European markets and Asia Pacific territories in 2024. Warner Bros. Discovery also said it was exploring a free ad-supported tier.
"Once our SVOD service is firmly established in the market, we see real potential and are exploring the opportunity for a fast or free ad-supported streaming offering that will give consumers who do not want to pay a subscription fee access to great library content, while at the same time serving as an entry point to our premium service," the company stated.
In June, AT&T also dropped its plan for new customers that gave users HBO Max as a bundled perk. However, announced in the Q2 results, Warner Bros. Discovery said it re-extended its agreement with AT&T.
“AT&T continues to be an important partner, and we are thrilled that HBO Max will continue to be part of AT&T internet and mobility plans,” said Scott Miller, executive vice president, Distribution, Warner Bros. Discovery, in a statement.
Although Wall Street expected $11.91 billion in revenue, the company missed the mark this quarter with a reported $9.8 million in revenue. Warner Bros. Discovery experienced a net loss of $3.4 million, which includes $1 million of restructuring "and other charges," according to the report.
Discovery and WarnerMedia reported separate and very different results last quarter. While WarnerMedia’s operating income declined 32.7% year over year, Discovery saw an increase of 13%, with its total revenue at $3.16 million.
The company has a debt load of around $53 billion and is cutting costs to reach a target of $3 billion in savings. This could explain the alterations to its content lineup as well as rumored staff changes.
For instance, The Wrap heard from sources that layoffs were expected in the coming months due to the restructuring of streaming platforms HBO Max and Discovery+. One source reported that 70% of the development staff may be laid off. While layoffs are standard when it comes to company mergers, some sources speculate that the move will result in HBO Max losing executives, and a line will be drawn to separate scripted and unscripted content operations.
TechCrunch reached out to the company for comment and is awaiting a response.
During its earnings call, President and CEO David Zaslav said, “We've been able to dig deeper into the financials and have gained a much better, more complete picture of where we are and the path forward, including identifying some additional and unexpected challenges that have and will continue to acquire our focus and attention. The upside is that there is even more room for improvement and cost savings.”
The new Warner Bros. Discovery President and CEO has gone on a canceling spree lately, as subscribers were met with disappointment and outrage yesterday with the news that "Batgirl" had been shelved because of poor reception from test audiences. There goes an estimated $70 to $90 million down the drain -- which we'd like to add is still less than the short-lived $300 million streaming service CNN+ that Zaslav axed in April.
"Scoob!: Holiday Haunt" was also pulled on Wednesday.
Zaslav removed six original films from the service, including the reboot "The Witches," as well as "Moonshot," "An American Pickle," "Superintelligence," "Charm City Kings" and "Locked Down." While content gets removed from streaming services all the time -- take Netflix for example -- what was unusual about this move was that Warner Bros. Discovery did it quietly.
Redditors have previously noticed a handful of other shows missing like "Amsterdam," "Final Space," "Czech It Out" and more. Lance St. Laurent pointed out on Twitter that "Vinyl" was also taken down without warning. Laurent said it was "troubling" as Max originals weren't the only ones getting axed. "Vinyl" was an HBO show that has long since been canceled.
When a subscriber wondered why "Full Bloom" was missing from HBO Max's lineup, the company tweeted in response,
Thanks for your interest in HBO Max content. As we work to bring together HBO Max and discovery+, we’re making some changes to our services. Part of that process includes the removal of select content. Thanks. ^SL
— HBOMaxHelp (@HBOMaxHelp) July 1, 2022
The company made the decision to cease new original programming in parts of Europe last month, as reported by Variety. Plus, it shut down Cinemax Go, its free streaming service, on July 31.
However, on September 30, HBO Max will gain content from Chip and Joanna Gaines' Magnolia Network. Last year, the Gaines struck a partnership with Discovery, launching the Magnolia linear and streaming channel. Discovery+ will still have programming from the Magnolia Network on its platform. HBO Max will get titles such as "Fixer Upper: Welcome Home," "The Lost Kitchen," "Restoration Road with Clint Harp" and many others. Discovery+ has a drastically different target audience than HBO Max, so it's unclear whether this was the right move.
Also, CNN Originals will get its own hub on Discovery+, with original series like "Stanley Tucci: Searching for Italy" and "Anthony Bourdain: Parts Unknown" moving to the service. Shortly after CNN+ was shuttered, HBO Max got CNN titles like "Who's Talking to Chris Wallace."
Zaslav has been adamant that the company will focus on smart spending. However, it's worrisome that Zaslav may be making content decisions based on making the accounting books look better rather than focusing on appeasing viewers with the content they enjoy.
In today's letter to shareholders, Zaslav wrote, "We're confident we're on the right path to meet our strategic goals and really excel, both creatively and financially, and couldn't be more excited about the future of our company."
It's likely the company will keep the biggest shows on HBO Max. Especially since HBO received 140 Emmy nominations this year, and "Succession" was the most nominated series with 25 noms.