Warner Bros Discovery Write-Downs $1 Billion More Than Anticipated
As a result of the merger of the two entities, Warner Bros Discovery was always expecting to post some spectacular pre-tax restructuring charges. However, it seems that they will now exceed their predictions by a rather startling $1B, and we’re not even done yet. Blake & Wang P.A entertainment lawyer, Brandon Blake, dives into the disappointing figures.
Restructuring and Transformation
The original benchmarks provided for the merged entity were $3.2B – $4.3B in restructuring and transformation initiatives, with $2B- $2.5B of that related to content. This has been revised to $4.1B – $5.3B, with $2.8B – $3.5B in content impairment and write-offs of development projects. Additionally, with the restructuring efforts still underway, it is expected those figures will rise. $825M of this came in the June quarter, from both development write-downs and impairment.
The timeline for restructuring only ends in late 2024. Content is the only category for which we have received fixed benchmarks- while there is organizational restructuring, facility consolidation, and contract termination costs on the table, we haven’t had them disclosed.
More Content Canned
This comes on top of the announcement that The Nevers and Westworld, two high-end drama productions for HBO, will be joining the comedic series Gordita Chronicles, Minx, and Love Life on the axed list. These are the latest in several high-profile and unexpected cancellations on both linear and streaming, including Wonder Twins, Batgirl, and the Scooby Doo movie. Little Ellen, The Big D, and Kill the Orange Bear have also become casualties. We’ve been told that Warner Bros Discovery will be cutting almost all of its animation and kid-centric programming on all channels, too. We’ve also seen a spate of layoffs at CNN.
Admittedly, while Warner Bros Discovery sprung to life with a solid status in the industry, it also carries a heavy debt load, and they have a promised $3B in cost savings to produce. According to statements by CEO David Zaslav, as well as their CFO, Gunnar Wiedenfels, Warner Media entered the deal with a ‘shakier’ financial position than originally thought, the reason behind the spate of changes. Content spending has also come under fire with shareholders across the industry in the latter half of this year, with Wall Street demanding that media companies take a closer look at content costs and their balance sheets.
However, opinions are seriously divided on the harsh maneuvers from the newly merged entity. Some believe there’s too much focus on short-term ‘feel good’ cuts for tax purposes to look good on balance sheets while sacrificing long-term potential. Some are no longer confident that Zaslav has a clear and cohesive plan to reposition Warner Bros Discovery for success, with too little focus on subscriber appeal and long-term success.
Is this a desperate and uncoordinated scramble that will have long-term knock-on effects on their viability? Or are they indeed just ‘trimming the fat’ for a leaner, meaner entity? Only time will tell, but these harsh write-downs certainly have created a stir.