Warner Bros. Discovery on Thursday reported results for Q3, including adding 7.2 million streaming subscribers globally, marking the company’s largest quarterly direct-to-consumer subscriber gains since launching the Max SVOD service in May 2023.
The Q3 subscriber additions bring WBD’s total global DTC base to 110.5 million. While touting momentum for Max in the quarter, the lion’s share of subscriber growth came from markets outside of the U.S. and Canada. In its more mature domestic market, WBD added about 200,000 DTC subscribers compared to Q2, for a base of 52.6 million. Domestically Max’s subscriber base has remained rather stagnant, this quarter coming in at the same number it had a year ago in Q3 2023. WBD marked launches in Latin America and European markets in the first half of the year, and internationally saw much stronger growth, adding 7.1 million DTC subscribers compared to Q2 for a total of 57.9 million.
As the media company added streaming subscribers, it also marked quarterly revenue growth and improved profitability for the DTC segment.
In Q3 DTC revenues totaled $2.6 billion, up 9% year-over-year, while the cost of revenue declined 5% compared to last year’s Q3 to $1.7 billion. Subscriber gains fueled an 8% yoy bump in DTC distribution revenue, totaling $2.3 billion in the period, while an increase in domestic subscribers to the Max plan with ads helped grow quarterly DTC ad revenue to $205 million. Fewer third-party licensing deals drove an 11% yoy decline in Q3 DTC content revenue, which totaled $107 million in the period.
WBD’s streaming segment posted adjusted EBITDA of $289 million in the quarter, compared to $111 million in Q3 2023, including a $41 million loss from the broadcast of the 2024 Paris Olympics in Europe.
Globally, WBD said subscribers to its ad lite plan grew 70% yoy, with 40% of global gross adds adopting the ad lite plan in Q3. While international still represents only a small contribution to DTC ad revenue, executives see opportunity ahead as the subscriber phase scales to drive monetization.
The positive traction in the DTC segment come as WBD reported total revenue of $9.6 billion, a 3% yoy dip as its studios and TV networks segments each experienced earnings declines in the period. Total Q3 adjusted EBITDA of $2.4 billion was down 18% yoy, while free cash flow declined to $632 million. Find WBD’s full Q3 2024 earnings results here.
On the DTC front, Warner Bros. Discovery has marked momentum in rolling out Max internationally, where it’s gaining a stronger presence – with debuts in Latin America and the conclusion of the first phase of its European rollout earlier this year after June launches in France and Poland. As of the June market launches, Max was available in 25 countries in Europe and 65 countries and territories globally. Later this month on November 19, it has Max roll outs planned for seven new markets in Southeast Asia, Taiwan and Hong Kong.
On Thursday’s earnings call, WBD CFO Gunnar Wiedenfels described how the sequence of the global DTC rollout put the company in a position to now enjoy two things at once: growth from new markets, and benefits, like lower investment needs, from a now more mature streaming business in its established markets - leading to the combination of subscriber, revenue and EBITDA growth in the DTC segment.
And WBD CEO David Zaslav suggested it’s willing to team up with others on bundles or integrated offerings, something it’s already pursued, as it and others expand into new regions. But he emphasized a need for not only a lower price for the consumer through bundling but a more seamless user experience as well.
“What we’ve learned is it really needs to be a better product, so that the consumer can come in and not just pay less [for multiple streaming services] …but also can navigate seamlessly between these products,” Zaslav said.
He cited “a lot of strength” in a partnership with Disney to bundle Hulu, Max and Disney+. While early, ”subscriber growth is significant and the consumer satisfaction is quite high,” said Zaslav of the bundle that launched in June.
It’s also leveraging relationships it has in markets internationally, pairing together local sport, entertain together with HBO and Max content. While still in the process of expanding globally, JB Perrette, CEO of global streaming at WBD, said partner demand for Max is high – both in the US and internationally - as partners are seeking broader, higher-quality curated content offerings to pair with in order to appeal to consumers, which WBD believes Max delivers on.
“The demand on the partner side to find innovative ways to help us drive distribution is very high and is key as we’re seeing our international rollout accelerate, and it’s part of what’s driving that growth,” Perrette commented.
As for the U.S., WBD leadership commented positively on the early renewal carriage arrangement it struck with Charter Communications in the period, which involves linear networks distribution as well as inclusion of the ad-supported versions of Max and Discovery+ in the operator’s Spectrum Select pay TV package at no additional cost to consumers.
Wiedenfels categorized the deal as “a great example of both the great value of our content to affiliate partners, as much as to consumers. And the greater flexibility in the industry to come up with forward facing new deal structures with the potential to have meaningful positive impact on the trajectory of our linear and DTC business.”
“We are seeing strong evidence of the great financial benefits of these new deal structures across our international footprint,” he continued, where the CFO said a long list of international distribution renewals in 2024 have shown net growth and total revenue to WBD across the partnerships “as our concessions on the linear side have been more than offset by strong gains at DTC.”
Updated to reflect WBD's Q3 international subscriber gains were 7.1 million. A prior version stated 7.1.