Warner Bros. Discovery revealed anemic subscription numbers for streaming service Max in its third-quarter earnings report, as the dual WGA and SAG-AFTRA strikes, the latter of which concluded Wednesday evening, dragged down subscriber development. 

Subscribers for Max declined by .7 percent, falling from 95.8 million in the year’s second quarter to 95.1 million in the third, which ended September 30th. 

The report reflects how the strikes plagued Max’s subscriber acquisition by paralyzing productions in the latter half of 2023, forcing Warner Bros. Discovery to delay projects. The company’s third-quarter earnings were also negatively affected by depressed advertising revenue, as its network television channels have lost viewers to the streaming model. 

Concerns over the lingering actors strike clearly weighed on Warner Bros. Discovery CEO David Zaslav, who opened the third quarter earnings calls with investors on Wednesday morning by outlining how seriously the studios were working to address SAG-AFTRAs demands. 

“Let me start by saying that we are hopeful we will reach a resolution to the SAG-AFTRA strike soon. We made a last and final offer that met virtually all of the union’s goals and includes the highest wage increase in 40 years,” Zaslav said. 

In September, Warner Bros. Discovery said it expected that the strikes would reduce its earnings for 2023 by between $300 million and $500 million. Following Zaslav’s remarks, Gunnar Wiedenfels, Warner Bros. Discovery’s Chief Financial Officer, warned investors that the strikes could continue to negatively affect the company’s financial outlook for 2024.

The warning did little to soothe shareholders. Following the report, Warner Bros. Discovery stock plunged by 20 percent, closing at $9.40 on Wednesday afternoon. The company’s stock moderately rebounded following the announcement of a tentative resolution to the SAG-AFTRA strike, the result of days of intense negotiating between studio executives and representatives from the actors guild.

Warner Bros. Discovery stock rebounded following the resolution of the strike Wednesday evening, though it continued to underperform the NASDAQ index as investors remain concerned over the company’s anemic advertising revenue. Chart via Yahoo Finance.

Addressing the decline in subscribers, Wiedenfels attributed the fall to an “extraordinarily light content slate” caused by the work stoppage, which prompted the company to delay releasing high profile projects such as Dune: Part Two, starring audience draws Zendaya and Timothee Chalamet. 

A lack of original programming represents immense trouble for a fledgling streamer like Max, as a steady stream of new content is considered the golden ticket for streaming success. 

“The one thing that absolutely drives subscriber uptake is new original content. [New] movies, TV shows, those are the things that draw consumers in,” said Richard Cooper, an analyst with Ampere Analysis. “We’ve seen a massive proportion of new titles impacted by the strikes in the U.S.” 

The strikes weren’t all bad news for Warner Bros. Discovery. Due to a pause on content spending, the company was able to pay off $2.4 billion in remaining debt from the merger of Warner Media and Discovery, Inc. in April 2022. 

Warner Bros. Discovery also revealed that the company’s domestic advertising revenue declined by 12% in the third quarter. The losses represent a generational shift, as younger audiences have neglected television networks in favor of streaming services to consume entertainment and news. 

Zaslav insisted that the company would continue to invest in its network television channels that make up a vital part of the company’s customer base. 

“We still believe in linear, and with sports and news, we’re anywhere between 25 percent and 45 percent of the viewership on cable,” he said.

The resolution of the SAG-AFTRA strike will help Warner Bros. Discovery increase its number of Max subscribers in 2024, as the resumption of production schedules provide an infusion of new content. The upcoming election season could also jumpstart the company’s domestic advertising revenue in the new year, said Dave Heger, a senior analyst at Edward Jones.  

“If nothing else, [2024 is] an election year,” Heger said. “Election year’s [are] always good for ad spending.”