Unfortunately for Discovery, investors are not fooled. Cash generation picked up over the first nine months of the year, but this was due to austerity measures in marketing and content spending - linked, among other things, to the writers' strike in the USA.
What's more, positive free cash flow is a poor cover-up, as investors are naturally keeping their eyes riveted on the development of the streaming business. But the pill is likely to be hard to swallow here, as for the first time since the launch of its offer WarnerBros has seen its subscriber numbers fall by 0.7 million, with an increase in average revenue per subscriber barely comparable to inflation.
Segment by segment, and on the basis of their "adjusted" EBITDA, this quarter saw a 5% drop in the studios business, despite the mega-success of Barbie. The TV networks business was down 9%, and there was also a drop in subscriber numbers. the streaming segment is in the black, mainly due to drastic cuts in the marketing budget - which no doubt explains the erosion of the subscriber base this quarter.
The consolidated income statement still shows an operating loss, albeit EUR1.5 billion lower than at the same time last year if the exceptional restructuring charge taken at that time is restated. This improvement was largely offset by higher financing costs due to rising interest rates.
With one profitable but structurally declining segment still accounting for half of consolidated sales, and two segments barely breaking even, WarnerBros still carries $43 billion of net debt on its balance sheet. Overall readability remains poor, and severe precautions must be taken when reading results presented adjusted and before amortization.
Market capitalization continues to melt like snow in the sun. However, CEO David Zaslav remains better off than his shareholders, pocketing a total remuneration of $285 million over the last two years.