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Warner Bros. Discovery: TV/Film Schedules Remain "Fluid" & Much More

Warner Bros. Discovery addressed the SAG-AFTRA & WGA strikes, TV/Film releases, news & sports, and more during today's Q2 2023 earnings call.

With the SAG-AFTRA and WGA strikes currently raging on (at least until AMPTP gets back to the negotiating tables and work up a deal that's fair & respectful to union members), it's a really weird time to be a media company having a Q2 2023 earnings call. But that's exactly what Warner Bros. Discovery CEO David Zaslav and his team had ready to go earlier today – and it was definitely a mixed bag of results. Without being able to tout the benefits of Barbie until the next quarter, WBD missed Wall Street goals on a number of levels. But it scored huge when it came to having free cash on hand – but the fact that a decent chunk of that came from as a "benefit" (using that word loosely) stemming from the strikes slowing/shuttering productions (thus, monies not being spent) won't (and shouldn't) sit well. In addition, it looks like television & film release schedules will remain "fluid," while Zaslav teased some streaming movement "coming soon" on the sports & news side.

The Bad: As far as Wall Street expectations go, there were some misses. WBD's loss per share came in as 52 cents – 10 cents worse than Wall Streets's estimated 42 cents. In addition, revenue dropped 4% from the previous year's quarter (with $10.358B also coming in below expectations), while streaming numbers saw a loss of 1.8M subscribers (95.8 million total subscribers). Some of the big reasons noted included the box office bomb that was the Ezra Miller-starring The Flash, a volatile ad sales marketplace, and the cost of the linear television business.

The Good(?): As far as the flow of free cash goes, WBD reached $1.7B – more than doubling the $789M from this same quarter last year and surpassing Wall Street's thoughts on the matter. With streaming losses beginning to slow down and WBD now looking for $5B in cost savings post-WarnerMedia/Discovery merger (a number originally set at $4.5B), WBD saw a little hope in the early hours of trading (but that might be gone by the time you read this).

The SAG-AFTRA & WGA Strikes: While Zaslav was "hopeful that all sides will get back to the negotiating room soon and that these strikes get resolved in a way that the writers and actors feel that they are fairly compensated," WBD CFO Gunnar Wiedenfels touted the benefits that the company has earned from the strike (which is not going to go over well): "We estimate were in the low $100M million range during the quarter," Wiedenfels shared. In fact, the CFO expects the company to see its free cash flow grow even further in Q3 because of the strikes ("subsequentially larger savings from the strikes").

From a financial standpoint, Wiedenfels said that the company's modeling is based on the strikes being resolved and work beginning again in September. "Should the strikes run until the end of the year, I would expect several hundred millions in incremental upside to our free cash flow guidance and some incremental downside to our adjusted EBITA," Wiedenfels added.

TV/Film Release Schedules Are "Fluid" for Now: "The remainder of feature films this year as well as Warner Bros TV production, release dates and performance expectations are naturally fluid given the ongoing strike, and we'll evaluate our options and update the market accordingly; we'll see greater vulnerability against our forecast," shared Wiedenfels.

CNN, Sports Coming to Max "Soon": When it comes to news and sports, Zaslav wanted to make it clear during the call that both categories "are important. They're differentiators. They're compelling." Zaslav added, "They make these platforms come alive. If you're on an SVOD platform and something is going on in the world and you can see it, it makes that platform really alive. So, you will hear from us about that. Soon."

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