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    WBD
    Earnings call· Mar 2025(Q1 FY25)

    Warner Bros. Discovery Q1 FY25 earnings call WBD

    May 8, 2025 Source

    Executive summary

    Warner Bros. Discovery Q1 FY25 — Strong Streaming Growth and Studio Rebound

    Warner Bros. Discovery reported a strong quarter, driven by significant subscriber growth and EBITDA in its streaming segment, fueled by a focus on high-quality content and global expansion. The company's internal reorganization provides greater transparency and strategic optionality, while its studio business is progressing towards its long-term EBITDA target through effective IP monetization. Management emphasized a disciplined approach to content spend and sports rights, alongside a strategic focus on bundling and product enhancements to drive future growth.

    Highlights

    5

    • Streaming gained over 5 million subscribers in Q1 FY25, and over 22 million subscribers in the last 12 months.

    • Streaming delivered $339 million in EBITDA in Q1 FY25.

    • The company is firmly on track to deliver at least $1.3 billion of Streaming EBITDA in 2025, an 85% increase versus 2024.

    • WBD expects to surpass its 150 million subscriber goal by the end of next year.

    • Studios are making progress towards their $3 billion EBITDA goal, driven by strong IP and content.

    Concerns

    4

    • NBA rights will result in a roughly $300 million cost increase in 2025 due to overlap of outgoing and incoming rights.

    • The U.S. linear business is not yet seeing streaming growth outrun its decline, unlike international markets.

    • Sports rights are described as a "rental business" that is difficult to make profitable in streaming alone.

    • Macro uncertainty and potential for a more turbulent environment are being monitored, though no material impact has been observed yet.

    Guidance & targets

    6
    CategoryTargetConfidence
    Streaming EBITDA
    $1.3 billion
    high materiality
    High
    Streaming Subscribers
    surpass our 150 million subscriber goal
    high materiality
    High
    Studios EBITDA
    $3 billion
    high materiality
    Medium
    NBA Rights Cost Increase
    roughly $300 million
    medium materiality
    High
    Corporate Cost
    down year-over-year
    low materiality
    High
    Content Spend
    moderately increase
    medium materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Streaming
    Delivered exceptionally strong quarter with significant subscriber growth and positive EBITDA, on track for 2025 targets.
    Subscribers (Q1 FY25): 5M+ net addsSubscribers (LTM): 22M+ net addsEBITDA (Q1 FY25): $339M
    		—22M+ subscribers (LTM)5M+ subscribers$339M EBITDA
    Studios
    Encouraged by progress in getting back to the $3 billion EBITDA goal, driven by strength in Warner Bros. Television and Motion Pictures, with a strong upcoming slate.
    		—Progress towards $3B EBITDA goal—Goal of $3B EBITDA

    Operational metrics

    11
    Streaming EBITDA
    $339M
    Q1 FY25

    Reported positive EBITDA for the streaming segment.

    Streaming EBITDA Target
    $1.3Bup 85% vs 2024
    FY25

    Firmly on track to deliver this target for the full fiscal year.

    Streaming Subscriber Net Adds
    5M+
    Q1 FY25

    Gained over 5 million subscribers in the first quarter.

    Streaming Subscriber Net Adds
    22M+
    LTM

    Gained over 22 million subscribers over the last 12 months.

    Streaming Subscriber Goal
    >150M
    FY26

    On track to surpass this goal by the end of next year.

    NBA Rights Cost Increase
    ~$300M
    FY25

    Cost increase due to overlap of outgoing and incoming rights, with Q2 taking a big part.

    Corporate Cost
    downyear-over-year
    FY25

    Expected to be down year-over-year for the full year.

    Content Spend
    moderately increase
    every year

    Planning to moderately increase content spend over the coming years to support growth ambitions.

    Streaming Ad-Lite SKU Rollout
    45+
    as of Q1 FY25

    Ad-supported SKU rolled out in over 45 markets, seeing great traction.

    Streaming Engagement Leader
    Latin America
    Q1 FY25

    LatAm leads in engagement with the most complete offering, U.S. and Europe are aligned and slightly behind.

    Studio Capital Expenditure
    upslightly up
    Q1 FY25

    Slightly up, going into necessary investments in studio footprint.

    Industry KPIs

    5
    MetricValueDetails
    ARPU armdiscussed
    Paid members subscribers5M+ net adds (Q1 FY25); 22M+ net adds (LTM); >150M goal (FY26)units
    Member quality and retentiondiscussed
    Live sports events rights roidiscussed
    Content spend title performanceMinecraft movie; Sinners; Final Destination; Superman; Super Girl; Lanterns; Harry Potter; House of the Dragon; Euphoria; The Pitt

    Product announcements

    9
    ProductTypeDetails
    Lord of the Rings moviemilestone
    Supermanlaunch
    Super Girlmilestone
    Lanternsmilestone
    Final Destinationlaunch
    Harry Potter (10-year plan)roadmap
    House of the Dragonroadmap
    Euphoriaroadmap
    The Pittroadmap

    Deals & partnerships

    1
    DisneyBundling of streaming services (Hulu, Disney+, Max)

    Bundle of Hulu, Disney+ and Max in the U.S. to create a better consumer experience, reduce marketing, and lower churn.

    Risks & headwinds

    5
    NBA rights cost increase2025 (Q2 and Q3 particularly)

    ~$300M cost increase

    Mitigation: very significant improvement in sports rights expenses with the NBA coming out in 2026

    Macro uncertaintysecond half

    no material impact over the last month

    Mitigation: take some precautionary measures; manage our cost base appropriately

    U.S. linear business decline

    not there yet (streaming growth not outrunning linear decline)

    Mitigation: Focus on streaming growth and Ad-Lite product

    Sports rights profitability

    hard still to find a business model in streaming alone that makes these premium sports rights profitable

    Mitigation: continue to experiment in a smart way; focus on owned IP

    Password sharing initiativesmonths to come; back half of the year and really into '26

    very soft messaging initially

    Mitigation: Messaging will get firmer and more visible to subscribers

    What to watch in Q2 FY25

    5

    Max "extra member" initiative progress

    months to come
    Currentonly available on our retail subscriber base
    Targetrolls out to more subscriber cohorts here in the U.S., globalizes later in the year and into '26

    Why it matters

    This initiative is expected to boost subscriber and ARPU growth, and its rollout pace and effectiveness are key to streaming segment performance.

    So in '25, I think you're going to see some benefits from it. I think it's going to increase and really be a more 12- to 18-month initiative as it rolls out to more subscriber cohorts here in the U.S., globalizes later in the year and into '26. And as the messaging on the password sharing gets more assertive over the course of the -- more in the back half of the year and really into '26.

    Q&A highlights

    8

    Inquired about the capital structure of hypothetical parts of the company post-reorganization and the potential for Max's "extra members" initiative.

    Gunnar stated no speculation on capital structures, emphasizing the reorganization provides transparency and optionality. He noted the "extra member" initiative is a 12-18 month rollout, starting with soft messaging, and will globalize later in the year.

    “We are very happy that we were able to get through this reorganization as quickly as we did the internal reorganization that we announced in December. As we laid out, we believe that we are now properly structured to take advantage of whatever opportunities may arise.”

    asked by Steven Cahall · answered by Gunnar Wiedenfels

    2 min read7 chapters

    Detailed Narrative

    01

    Streaming Growth & Strategy

    Max continues to see strong growth, with over 5 million net adds in Q1 and 22 million over the last 12 months, driven by quality content like HBO series and local language offerings. The strategy includes globalization, penetration growth through Ad-Lite SKUs, ARPU expansion via advertising and the "extra member" initiative, and continuous product enhancements. Bundling, such as the Disney/Hulu/Max offering, is also a key strategic focus to reduce churn and marketing costs.

    02

    Studio Performance & IP Strategy

    The Studios segment is making progress towards its $3 billion EBITDA goal, leveraging a mix of IP-based blockbusters and original content. Key franchises like DC (Superman, Super Girl, Lanterns), Harry Potter (10-year plan), and Lord of the Rings are central to building long-term asset value. The company also strategically licenses non-core IP, like Presumed Innocent to Apple or Scooby-Doo to Netflix, to maximize value from its extensive library.

    03

    Reorganization & Optionality

    The company completed an internal reorganization into two main divisions (Streaming and Studios) to enhance transparency for investors and create strategic optionality. This structure allows for clear visibility into content flows and financial performance, positioning WBD to adapt quickly to industry changes and potential future restructuring.

    04

    Sports Strategy & Content Investment

    WBD employs a disciplined and experimental approach to sports rights, balancing acquisition and engagement benefits with the high costs, particularly in the U.S. where profitability is challenging for streaming-only models. The company prioritizes owned IP (DC, Harry Potter, Game of Thrones) as core assets, viewing sports as a "rental business" and preferring to invest in long-term franchise value, while moderately increasing content spend on its core storytelling.

    05

    ARPU Expansion Levers

    To drive ARPU growth, WBD evaluates wholesale deals based on lifetime value, not just initial ARPU. Key levers include the rollout of the Ad-Lite SKU in over 45 markets (expected to grow ARPU over time⏳), the "extra member" initiative, potential pricing adjustments in certain markets, and upsells for sports content, particularly in Europe. Enhanced engagement from product improvements is also expected to boost monetization.

    06

    Macro & Advertising Outlook

    Despite global macro uncertainties, WBD has not observed any material impact on its business, with Q2 advertising tracking in line with Q1. The company is taking precautionary measures to manage its cost base for a potentially turbulent environment. For the upcoming upfronts, WBD will emphasize its coveted streaming inventory on Max, leveraging demand for specific titles and quality content.

    07

    Content Spend Philosophy

    WBD's content strategy is guided by "it's not how much, it's how good," a shift implemented two years ago. This involves moving away from high-volume kids' content and unscripted programming towards pay-1 movies, global scripted originals, and select local originals. While content spend will moderate📎ly increase annually, the focus is on strategic allocation to bigger bets that build asset value and differentiate the service.

    AI-generated summary of the company’s earnings call. Not investment advice.