Shares of Warner Bros. Discovery fell 12 percent in late trading following Thursday's disappointing earnings call, reflecting the first full quarter since the merger of WarnerMedia and Discovery Inc.
The media conglomerate fell more than $2 billion short of Wall Street estimates, with $9.8 billion in revenues for the quarter, and a loss of $3.4 billion. The news capped off a tumultuous week that began with the abrupt cancellation of Warner Bros.' Batgirl and Scoob! Holiday Haunt movies, and continued with fears of deep cuts to HBO Max's content and staff, and word of a "strategic shift" for DC Films.
Warner Bros Discovery CEO David Zaslav announced on the call plans to launch a new streaming service in summer 2023 that will combine HBO Max and Discovery+. “At the end of the day, putting all the content together was the only way we saw to make this a viable business," JB Perrette, CEO and president of global streaming and games for Warner Bros. Discovery, told analysts.
More Investment in HBO, and a 'Strategic Shift' for DC Films
Although executives didn't mention job cuts as part of the seismic restructuring, TheWrap contends insiders expect "a gutting of HBO Max," and "significant" layoffs. However, Zaslav indicated to Deadline after the call that Warner Bros. Discovery will actually spend more money on content for HBO and HBO Max.
"Quality is what matters," he said. "Quality is what [Chief Content Officer] Casey [Bloys] and that team is delivering. It’s the best team in the business. We’re doubling down on that HBO team. They’re all committed under contract, and we’re going to spend dramatically more this year and next year than we spent last year in the year before."
The cancellation of Batgirl, following a test screening in July, heralded Warner Bros. Discovery's pivot away from direct-to-streaming films. "We can't find an economic case for direct-to-streaming films," Zaslav said on the call. Reports indicate that, while the cast and story were embraced by the test audience, the studio would have to spend another $7 million to $9 million in post-production and special effects if it had any hopes of making Batgirl suitable for theatrical release. The shift brings into question the fates of Blue Beetle, which wrapped principal photography in March, and Supergirl, the planned spinoff of The Flash movie.
Amid that "strategic shift," Zaslav promised, "There will be a team with a 10-year plan focusing just on DC," which he compared to the strategy for the Marvel Cinematic Universe.
"We think we could build a long-term, much more sustainable growth business out of DC," Zaslav said. "and as part of that, we’re going to focus on quality. We’re not going to release any film before it’s ready."