Warner Bros earnings hit despite 'Barbie' box office success
Analysts say the market is not thrilled with Warner's financial loss following the huge success of 'Barbie'.
Box office smash helped Warner Bros Discovery top core quarterly profit estimates but the effects of two Hollywood strikes and a weak advertising market could hamper earnings into next year, company executives said. The dour outlook sent the company's shares tumbling over 14% at one stage.
Although Hollywood's film and television writers ratified a new three-year contract in September, ending their 148-day work stoppage, members of the SAG-AFTRA actors union have been on strike since July, upending the industry's 2024 film production schedule and depriving media companies of new content to sell.
Chief financial officer Gunnar Wiedenfels said there's a "real risk" that the financial hit from the strike will linger into 2024. "It is becoming increasingly clear now that much like 2023, 2024 will have its share of complexity, particularly as it relates to the possibility of continued sluggish advertising trends," Wiedenfels said. "We don't see when this is going to turn."
The company saw its lightest original content in years and had to delay some releases, leading to a drop in third-quarter streaming subscriber numbers.
Mr Wiedenfels said that for full-year 2023 there will likely be “a few hundred million dollars” of a negative impact on earnings due to strike impacts, and “several hundred million dollars” of positive cash flow as a result of not being able to spend on production.
"The extreme success of the movie may be a one-off for them that won't be repeated for at least a few years," said Michael Schulman, chief investment officer at Running Point Capital.
The media company, forged by the union of WarnerMedia and Discovery, posted third-quarter adjusted core earnings of $2.97bn. Overall revenue of $9.98bn was in line with estimates. It posted a net loss of $417m, down from a $2.3bn net loss from a year earlier.
The market is not thrilled with the fact that even with the unparalleled blockbuster success of , they still found a way to lose $417m in the quarter. Not ideal," Great Hill Capital Chairman Thomas Hayes said.
Advertising revenue at its networks segment declined 12% to $1.71nm as global conflicts and inflation created an uncertain climate for marketers. The company's streaming unit posted an adjusted core profit of $111m.
Warner Bros Discovery had 95.1 million global direct-to-consumer customers at the end of the quarter, down from 95.8 million in the previous quarter. In May, it launched its Max streaming service — combining HBO Max's scripted entertainment with Discovery's reality shows.
