WarnerMedia April 22 reported first quarter (ended March 31) revenue from Warner Bros. home entertainment and video games of $349 million, down about 4.5% from revenue of $365 million during the previous-year period.
It should be noted that the COVID-19 pandemic struck near the end of the first quarter of 2020, with the World Health Organization’s March 11 declaration of a global pandemic, which was followed days later by the closure of theaters. Home entertainment releases during the quarter were thus largely unaffected.
Warner’s top-selling packaged-media releases in the first quarter of 2021 included Tenet and Harry Potter: The Complete Collection.
Meanwhile, WarnerMedia, whose properties include Warner Bros., HBO, HBO Max, TBS, TNT, TruTV and CNN, saw total revenue increase 9.8% to $8.5 billion, from $7.7 billion in the previous-year period. Revenue was driven by higher subscription, advertising and content sales, reflecting the partial recovery from prior-year impacts of COVID-19.
Subscription revenue increases reflected growth of direct-to-consumer domestic HBO Max and HBO subscribers, and, to a lesser extent, the May 2020 acquisition of the remaining interest in the HBO Latin America Group. Advertising revenue improved when compared to the prior year, resulting from the return in 2021 of the NCAA Division I Men’s Championship Basketball Tournament.
Additionally, content revenue increased due to higher sales to Max for theatrical product and “basic networks” licensing, partly offset by lower television product licensing from prior-year licensing to Max. In 2021, all Warner Bros. theatrical releases are streaming concurrently on Max for 31 days.
Operating expenses totaled $6.6 billion, up 13.9% when compared with the first quarter of 2020, driven by higher programming and marketing costs for Max and higher programming, including NCAA sports costs, partially offset by lower bad debt expense. Direct costs supporting DTC revenue were $1.7 billion in the first quarter of 2021, versus $911 million in the year-ago quarter.
WarnerMedia segment operating contribution was $2 billion, up 0.8%. The WarnerMedia segment operating income margin was 23%, compared with 25.7% in the year-earlier quarter.