Discovery Inc. added 2 million direct-to-consumer subscribers in the fourth quarter of 2021, but Wall Street analysts were more focused on the company's streaming spending plans upon completion of its acquisition of Warner Media LLC.

The company finished the period ended Dec. 31, 2021, with 22 million direct-to-consumer customers, including subscribers to its aggregate discovery+ service, up sequentially from 20 million.

Executives on Discovery's Feb. 24 earnings call emphasized they believe they are already spending enough on content and have the wherewithal to allot more but will be prudent about such allocations.

"Our goal is to compete with the leading streaming services, not to win the spending war," said President and CEO David Zaslav.

CFO Gunnar Wiedenfels said Discovery spent a record $4 billion on content across its portfolio in 2021, "definitely enough" from his perspective. "The key question is going to be how much is going to be enough going forward. We have plenty of room in our business case."

With expected combined 2023 cash flow of $8 billion, Warner Bros. Discovery will have a lot of dry powder. "But we're not going to just say, 'Let's pour everything into the direct-to-consumer business.' There is a level of investment that makes sense for that business, and that's how we're going to attack it," said Wiedenfels. The deal is now expected to close early in the second quarter.

"We don't know exactly what we are going to need to do," Zaslav said. But he told analysts, "You're not going to see us come in and go, 'All right, we're spending $5 billion more.'"

As an example of Discovery's strategy, Zaslav pointed to the company presenting some 600 hours on Food Network (US) that viewers liked and from which it turned a profit. If Discovery added another 400 hours of content, then maybe audiences would be a little bit happier, but the company would not make any money, Zaslav said.

Referencing recent and current original shows "Succession," "Euphoria," and period drama "The Gilded Age," Zaslav asked: "Would HBO be doing a lot better if it had three more really successful scripted series right now? It's not clear."

Previously, Zaslav has said Warner Bros. Discovery could have more than 200 million global direct-to-consumer subs within two or three years of the merger's consummation. Warner Media closed 2021 with 73.8 million HBO Max/HBO million global subscribers.

On the Feb. 24 call, Zaslav emphasized the company wants to compete against Netflix Inc. and Walt Disney Co., but noted, "We are very different." Zaslav said Disney has "a group of people across the world that absolutely love their product," while Netflix carries very broad appeal.

He called Discovery's offering and library "nourishment," while billing WarnerMedia's as "shock and awe." The combination will make for "a really compelling menu," Zaslav believes.

During the fourth quarter, Discovery reported $450 million of next-generation revenues, comprising subscription and advertising contributions from its direct-to-consumer offerings, as well as revenues from GO, its TV Everywhere application and other digital properties. For the full year, next-generation revenues rose 80% to some $1.60 billion.

Overall, fourth-quarter 2021 revenues climbed 10% to $3.19 billion, up from $2.89 billion in the final reporting period of 2020.

Net income available to Discovery declined to $38 million, or 8 cents per share, from $271 million, or 42 cents per share, in the prior-year period, owing in part to a 29% rise in selling, general and administrative expenses to support discovery+ subscriber growth and new market launches.

The S&P Capital IQ consensus estimate for EPS in the fourth quarter was 85 cents on a normalized basis and 53 cents on a GAAP measure.

For the full year, total revenues improved 14% to $12.19 billion.

Net income available to Discovery came in just above $1.00 billion, or $1.54 per share, down from nearly $1.22 billion, or $1.81 per share, in 2020. Results reflected $600 million in incremental investment on next-generation initiatives and an approximately $200 million loss for the Tokyo Summer Olympics.

The S&P Capital IQ consensus estimate for EPS in 2021 was $2.88 on a normalized measure and $1.98 on a GAAP basis.