As of the end March, Discovery, led by CEO, reached 24 million streaming subscribers worldwide to its direct-to-consumer services, including Discovery+.
On Tuesday, the company disclosed its earnings and operating updates for the pre-merger quarter, which they described as better-than-expected per share.
WarnerMedia's HBO and its HBO Max streaming service ended March with 76.8 million worldwide subscribers, a 3 million increase after reaching 73.8 million subscribers as of the end of 2021, with the telecom giant reporting its previous entertainment division.
Discovery discussed on Tuesday that it defines a direct-to-consumer (DTC) subscription as "1) a subscription to a DTC product for which we have recognized subscription revenue from a DTC platform; 2) a subscription received through wholesale arrangements for which we receive a pay status, as well as free trials; and 3) a subscription recognized by certain joint venture partners and affiliated parties." At the end of each quarter, subscribers include the actual number of users who paid up to seven days after the quarter end.
A third of the conflict in Ukraine has resulted in the country's history. Our quarterly subscriber count continues to include Ukraine subscribers to Discovery+, who are temporarily receiving the service for free, the total of which is not material., the company said.
The first quarter earnings report for Discovery's performance as a standalone company before the mega-merger, also showed a 5 percent advertising revenue gain and 11 percent distribution revenue growth, driven by Discovery+. Guggenheim analyst Michael Morris recently raised his first-quarter ad revenue prediction for Discovery for the first quarter. He also raised the 5.7 percent increase to $460 million in the United States.
Discovery+ reported an increase in advertising revenue in its business by 11%, excluding foreign exchange variations.
The total revenue in the first quarter of the year increased by 15 percent, or 13 percent after the foreign exchange occurrences, to $3.16 billion. That included nearly $450 million, a 55 percent increase in previous-year income, of what the company described as "next-generation revenue," which it refers to as "subscription and advertising revenues" from the company's DTC products, as well as revenues from TV Everywhere, our Go applications, and other digital properties.
In the year-ago period, quarterly net income increased to $456 million, or earnings per share of 69 cents, compared to $140 million, or 21 cents per share. The bottom line benefited from total operating expenses, which increased by 14 percent, mainly due to increased content amortization at Discovery+, which started in January 2021, and the linear networks, but selling, general and administrative expenses, respectively, fell 25%. Were we more focused on Discovery+'s marketing expenses than we had previously predicted.
"We are building a pure-play media company with strong revenues and the greatest compelling intellectual property ownership, franchises, and brand portfolio in our industry," Warner Bros. Discovery CEO Zaslav said. "Importantly, we have a worldwide footprint of touchpoints to deliver our content to consumers on every screen. We have partnered with a strategic framework and organization to ensure better command and control throughout the company. I couldn't be more excited about the huge opportunity."
Morris is also bullish about the merged company. "We see attractive long-term potential for the combined company, but we need to look beyond its go-to-market strategy and potential selling pressure from core AT&T shareholders," he wrote in a recent report.
Warner Bros. Discovery said combining HBO Max's subscriber acquisition power with Discovery+'s customer retention power will "make for a blowout DTC (direct-to-consumer) product, which should certainly drive significant revenue growth for years to come." After discussing the merger, he said, it would include a rapid addition of Discovery+ and HBO Max, followed by eventually combining both streaming services into a single consumer offering and platform. "We'll start working on an interim solution in the meantime.
