Warner Bros. Discovery’s Dramatic Cost-Cutting Measures Are Already Paying Off for the Company
Warner Bros. Discovery has been the subject of much controversy over the past six months. From scrapping the nearly complete $90 million “Batgirl” movie to removing content en masse from HBO Max to canceling dozen of shows, WBD has turned heads with its extreme cost-cutting measures. However, those measures have paid off according to WBD CFO Gunnar Wiedenfels.
“It was a tough year last year,” he said at the Morgan Stanley TMT Investors conference this week. “[I am] happy with what we achieved, and much, much better to be sitting here this year with a little bit of tailwind from all the tough decisions that we made and the balance is really shifting towards the opportunity for growth and building.”
Wiedenfels said that he views the aggressive cuts the company made over the past several months as cutting out the excesses that the previous regime had put in place. He noted that the company didn’t abandon anything that made sense strategically or financially.
“We got a lot of criticism, especially in the press at the time,” he continued. “At this point, I think a lot of our peers and others in the industry have kind of made similar decisions. So we haven’t abandoned anything that made sense, and we’re very committed to continuing to invest.”
And while WBD’s cost-cutting measures may have been extreme and the blowback harsh, the numbers speak for themselves. During WBD’s most recent earnings call, the company reported streaming losses of $217 million in the fourth quarter, a marked improvement over the $600 million it reported in the segment during the previous quarter. In addition, the $217 million deficit for the time period was an improvement of $5.11 million over the previous year, before the merger of Discovery and WarnerMedia.
Comparatively, Disney reported fourth-quarter streaming losses of over $1 billion, nearly doubling year-over-year, and Peacock reported fourth-quarter streaming losses of $978 million. Consequently, the situation for Warner Bros. Discovery is not as dire as it likely would have been without the moves.
And these cost-cutting measures haven’t hampered WBD’s success this year. The company is on track to save $4 billion overall as a result Discovery’s acquisition of WarnerMedia, up from a previous commitment to save $3.5 billion. It has also garnered critical acclaim for HBO’s “The Last of Us,” seen record sales from the “Hogwarts Legacy” video game, and plans to continue to expand on underutilized franchises.
Wiedenfels also pointed out that others in the industry have made cuts as well. Over the past few months, AMC Networks has canceled a number of projects, even those in which shooting had already begun or finished. The second seasons of “61st Street,” “Pantheon,” and “Moonhaven” were canceled, as well as the new shows “Invitation of a Campfire” and “Damascus.”
The cancellations occurred a month after Christina Spade, the CEO of AMC Networks, left the position and the company announced major cost-cutting measures. This included the termination of 20% of its U.S. employees and $400 million in write-downs as it restructures. At AMC’s TCA press day, Dan McDermott, president of entertainment and AMC Studios, said that cost-cutting has been a “difficult but essential process.”
Additionally, STARZ has canceled and removed programs from its streaming service, including “Step Up,” “Becoming Elizabeth” and “Deadly Liaisons.” At the time, it was unclear why STARZ decided to axe the three shows, however, it was suggested that it might be related to Lionsgate’s plans to separate its studio from STARZ in the near future or because it might be trying to sell these programs to free ad-supported streaming (FAST) channels and ad-supported streamers.
“We’re off to a great year in 2023, lots on the to-do list, but we’re certainly [in] a position now, where we’re reaping the benefits of all the hard work of last year,” Wiedenfels said.
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