Investors eye NBA updates amid linear TV turmoil

Warner Bros. Discovery (WBD) will report first quarter earnings before the bell on Thursday as the media giant works to pare its debt amid a declining linear TV businessand an unfavorable ad market. Investors will also closely be watching for any updates on NBA media rights after a Wall Street Journal report said the company is at risk of losing those rights to competitor NBCUniversal (CMCSA).

On Monday, WBD CEO David Zaslav did not elaborate on the status of ongoing talks while speaking at the annual Milken Institute conference in Beverly Hills.

“We continue to be in constructive negotiations with the NBA,” he said. “It’s a great league. The TNT team does a terrific job. And we love the NBA.”

The company has struggled in recent quarters, with profits hit by a weak linear advertising environment and pressure on affiliate fees, or the fees pay TV providers pay to network owners to carry their channels. That’s likely to impact first quarter EBITDA and put full-year adjusted EBITDA at risk of falling below $10 billion, according to the latest Bloomberg estimates. That’s $4 billion below what analysts had expected at the time of its merger.

Here’s what Wall Street expects for the first quarter, according to Bloomberg estimates:

  • Revenue: $10.27 billion versus $10.70 billion in Q1 2023

  • Adjusted loss per share: -$0.24 versus -$0.44 in Q1 2023

  • Subscriber net additions:1.25 million versus 1.6 million in Q1 2023

“WBD has an important year ahead, and 1Q probably will not be a good start,” Macquarie analyst Tim Nollen wrote in a note to clients ahead of the results.

Still, the analyst said the company has some momentum with its upcoming sports streaming partnership with Disney (DIS) and Fox (FOXA), along with its Max streaming service recently launching in markets outside of the US, including Latin America and Europe.

And on Wednesday, WBD and Disney said they would offer a bundle of the Disney+, Hulu and Max streaming services in the US starting this summer. Customers will be able to sign up for the package, with or without ads, on any of the three platforms.

In February, the company revealed its direct-to-consumer streaming unit turned a profit for full-year 2023, posting $103 million in EBITDA compared with a loss of about $2.1 billion in full-year 2022.

Subscriber gains have been relatively stagnant but “overseas launches and hit series like ‘House of the Dragon’ should reinvigorate gains,” Bloomberg Intelligence analyst Geetha Ranganathan said.

The company is reportedly aiming for more cost cuts and further streaming price hikes. According to Bloomberg, cost-cutting plans could include layoffs after WBD slashed 2,000 jobs over the past year. The company did not immediately respond to Yahoo Finance’s request for comment.

WBD has also been at the center of M&A talks with its two-year post-merger lockup period officially over. At Milken, Zaslav side-stepped talks about whether or not he’d be interested in acquiring a company like Paramount (PARA), which is currently seeking a buyout.

“Paramount is a great company. We have a number of great content companies. For us, our goal is to [do] the best we can with the businesses that we have,” he said. “You need to look at your peers. You need to know what everyone is doing and learn from them, but ultimately, you’re going to be successful if you do a good job with the assets that you have.”

Warner Bros. Discovery stock is down about 30% since the start of the year.

FILE PHOTO: The Warner Bros logo is seen during the Cannes Lions International Festival of Creativity in Cannes, France, June 22, 2022. REUTERS/Eric Gaillard/File Photo

The Warner Bros logo is seen during the Cannes Lions International Festival of Creativity in Cannes, France, June 22, 2022. REUTERS/Eric Gaillard/File Photo (Reuters / Reuters)

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X@allie_canal,LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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