Warner Bros Discovery reported an annual profit for its direct-to-consumer business for 2023, compared to a loss of over $2 billion for the previous year. Overall, the company reported a net annual loss of $3.13 billion on revenues of $41.32 billion. It is aiming for the direct-to-consumer business to deliver earnings of $1 billion in 2025. In the future, it looks like the rebundling of individual online offerings will become the new normal.

Full-year profit on the Warner Bros Discovery direct-to-consumer business was $103 million in 2023, on revenues of $10.15 billion. That compares to a loss of over $2 billion on pro forma revenues of $9.69 billion the previous year.

However, for the last three months of 2023, the direct-to-consumer segment still reported negative earnings before interest, tax, depreciation and amortisation of $55 million on revenues of $2.53 billion.

Total direct-to-consumer subscribers reached 97.7 million, including Max and Discovery+. That included 1.3 million from its acquisition of Blu TV. Net subscribers increased by just 0.5 million over the quarter. The number of subscribers in the United States and Canada fell by 0.6 million to 52.0 million.

It should be noted that the direct-to-consumer segment made up just under a quarter of total company revenues of $41.32 billion. Revenue for the traditional studio and networks businesses fell slightly, with overall pro forma revenues down 4% from the $43.10 billion the previous year.

So, while the online business may have reached profitability, it is still sustained by a large but declining legacy production business.

“After executing against our strategic plan to reposition the company, we are now on solid footing with a clear pathway to growth,” said David Zaslav, the chief executive. “We have an attack plan for 2024 that includes the roll-out of Max in key international markets.”

“This next chapter from Warner Bros. Discovery is about putting us on a pathway to growth,” he told analysts. “And we’ve got a lot of drivers of that growth, which at its core is underpinned by great storytelling.”

“The top priority for us has been building Max, our streaming service,” he said. “We fought hard to get Max to be profitable last year. We are now committed to driving profitable top line growth.”

“We have a number of meaningful growth levers ahead, including the rollout of Max in key international regions and markets, starting with Latin America next week, with markets in EMEA and APAC to follow later in the year, including new markets, France and Belgium to coincide with the Paris Olympics this summer.”

He pointed out that its online services are only available in less than half the addressable households and markets as its larger peers, like Netflix and Disney, which provides opportunity for growth and globalisation. That includes markets like the United Kingdom, Germany, Italy, Australia, and Japan.

The company is entering into a new sports joint venture with Disney and Fox, which it will be able to bundle with Max.

The prospect of bundling services together seems inevitable. “I think everything is driven by the consumer experience, and the consumer experience right now is cluttered, it’s awkward, it’s somewhat confusing,” he said. “Rebundling just makes an awful lot of sense.”

“In the longer term, I expect that there will be meaningful bundling,” he suggested. That will either be through an intermediary platform like Apple, Amazon, or Roku, through a traditional provider like Charter and Comcast, or through a bundle of services from a company like Warner Bros Discovery. “I’ve always advocated that we should do it ourselves,” he said. “It’s not which channel is it on? It’s not where do I go? How do I go? Do I have it? Don’t I have it? It’s in one place. And I think more and more will be gravitating toward that.”