Warner Bros' revenue disappoints on soft ad sales, weak box-office performance

By Harshita Mary Varghese

Aug 6 (Reuters) - ‌Warner Bros Discovery ​missed second-quarter ​revenue expectations on Thursday, hurt by lackluster box-office performance and soft advertising sales due to the absence of NBA games.

Studio revenue slumped 39%, with releases ‌including "Mortal Kombat II" and "Supergirl" failing to replicate the blockbuster success of last year's "A ⁠Minecraft Movie" and "Sinners".

Warner's film slate is weighted toward the second half of the year, with major releases such ‌as "Digger" and "Dune: Part Three" expected to ‌boost box-office performance.

Britain's Competition and Markets Authority cleared Warner's $110 billion merger with Paramount on Thursday, saying it was unlikely to harm competition in the country.

Still, the merger remains ​tied up in court, with California and 11 other states seeking to block it on antitrust grounds. Paramount has agreed to pause the deal until June 2027, while a ⁠federal trial is set for March 2027.

"Approval by the CMA may strengthen Paramount's argument in U.S. court proceedings but that ​decision ultimately will hinge on arguments presented to the court," said Seth Shafer, principal analyst at S&P Global Market Intelligence.

Speaking on a post-earnings call, ​the CEOs of both companies expressed confidence that the ‌deal would be completed.

Shares of Warner Bros were up 1.5%.

NBA LOSS HITS ADS; STREAMING REMAINS BRIGHT SPOT

The absence of NBA games this year, ⁠coupled with declines in domestic linear TV audiences, drove a 22% drop in Warner Bros' advertising revenue.

Warner said the 2026 FIFA World Cup reduced its share of viewers and advertising revenue in several markets ⁠during June and July.

While revenue at the CNN-owned networks division fell 17%, a 23% decline in operating expenses ​due to the absence of costs tied to NBA rights and lower content spending helped Warner post a surprise quarterly profit of 6 cents per share.

Analysts polled by LSEG had expected a loss of ‌13 cents.

Warner's streaming business, which is central to the deal, remained a bright spot in the second quarter with HBO Max's international expansion ‌and original content like "The Pitt" driving revenue up 10%.

The combined HBO Max and Paramount+ service is expected ⁠to give greater scale to compete ‌with streaming giants such as ​Netflix.

Warner Bros Discovery reported revenue of $8.72 billion in the second quarter, well below the expectation of $9.29 billion.

(Reporting by Harshita Mary Varghese in Bengaluru; Editing by ‌Arun Koyyur)

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