Warner Bros. Discovery’s ‘Nearly Completed’ Upfront Has Volume Up, Subscribers Down

For Warner Bros. Discovery, volume is up, but subscribers … not so much.

During an earnings call today, Warner Bros. Discovery’s CEO David Zaslav revealed the company is “nearly completed” with its upfront talks, with volume up and pricing levels “consistent” with the previous year. In 2022, the company earned low- to mid-teen CPM (cost per thousand viewers reached) increases and nearly $6 billion in upfront commitments in its first year as a combined company.

Gunnar Wiedenfels, the company’s CFO, also announced that, in addition to linear volume being up, “DTC volume is up more than 50% in the marketplace in which CPMs were positioned to drive scale for us as much as for the broader market.”

Regarding this year’s upfront, Zaslav called it a “very good result in a tough market.” With the news, the company is the fifth major upfront week presenter that’s wrapping up talks, following NBCUniversal, Fox, Paramount and TelevisaUnivision.

Along with the upfront announcement, the company revealed a global loss of 1.8 million subscribers in the same quarter where it launched Max, its new combined HBOMax and Discovery+ streamer, bringing its new total to 95.8 million across its platforms.

However, despite the losses, Zaslav said the launch has gone “exceedingly well,” with the company experiencing lower churn than expected and getting stronger engagement from subscribers.

The CEO acknowledged the soft ad market during the call, saying the company wasn’t seeing a “meaningful recovery” thus far, but said, “We just came out of an upfront that is encouraging, at least for us.”

To an analyst question on the ongoing shift from linear to streaming, Zaslav noted that sports were up mid-single digits for the company, there were price increases among some of its affinity networks, some of the smaller networks were slightly down and Max was the overall star, though it’s not at linear levels quite yet.

“We need to build up Max for now. There’s a huge demand for it,” Zaslav said, later adding, “We can’t predict what’s going to go on with the linear business, but we have a lot of command and control as I talked about earlier.”

Not as upfront about the upfront

Though publishers regularly shared commitment totals and CPM increases in last year’s upfront, this year’s slow market has the companies mainly keeping number specifics to themselves.

In addition to an overall soft ad market, companies are also dealing with the ongoing writers and actors strikes. For Warner Bros. Discovery’s part, the company says the strikes led to “modest cash savings” in the low $100 million range. The company expects a return to work date in September, however.

“We are in some uncharted waters in terms of the world as it is today and measuring it all, and so I think in good faith we all got to fight to get this resolved,” Zaslav said. “And it needs to be resolved in a way that the creative community feels fairly compensated and fully valued.”

A year after the merger

Last year, Warner Bros. Discovery was the final major in-person upfront presenter to cross the negotiations finish line, with its $6 billion in commitments coming in behind rivals NBCUniversal and Disney, as the pair secured $7 billion and $9 billion at the time, respectively.

However, with the company now a year removed from its $43 billion merger between WarnerMedia and Discovery, ad sales chief Jon Steinlauf was optimistic for different results ahead.

“The bottom line is we did not have enough time last year to be able to put the right strategy together knowing what the histories were with each of these companies, and we did the best we could,” Steinlauf said. “We had some successes. We had some failures. We probably did not perform at the level of expectation.”

The ad sales chief said last year’s early market also exacerbated the situation, giving the company even less time to come together.

“This time around, we’ve been together for 13 months,” Steinlauf said. “We now work in the same building in almost every city.”

Among the priorities, Steinlauf touted sports and streaming, with CNN being especially important in an election cycle.

“I think the side-by-side with sports will be streaming,” Steinlauf said. “Overall demand may not be up all in when you count everything, but with CNN, we’re heading into an election year, so we know that brings sponsors in different ways for coverage of the election cycle. The advertisers are paying attention to CNN, knowing that the ratings are about to take off as they always do in election cycles.”