Warners Bros’ Earnings Call Shows Hollywood Strikes Are Making an Impact on Studios’ Bottom Lines
Key takeaways
- Warner Bros Discovery now predicts up to a $500 million loss on its revenue this quarter due to the Hollywood strikes
- It’s the first time the strikes’ impact has been quantified
- Warner Bros Discovery’s share price rose 2.7% at the news, driven by the increase in free cash flow
Warners Bros Discovery has finally cracked and admitted the Hollywood writers’ and actors’ strikes are hitting it financially. The studio just filed an updated earnings report reflecting the financial loss, though apparently, investors shrugged it off as the stock rose on Tuesday. Here’s what you need to know.
What happened with Warner Bros’ earnings?
Warner Bros. Discovery has filed an adjusted quarterly earnings report, originally announced in August. The studio expects revised EBITDA earnings to fall between $10.5 billion and $11 billion, reflecting a $300 million to $500 million loss “predominantly due to the impact of the strikes”.
Warner Bros. Discovery had previously estimated the strikes would be finished by September, but instead, they’ve rolled into the four-month mark without any signs of slowing. The last meeting between the WGA union and the studios was August 22, while the SAG-AFTRA union hasn’t met with the studio heads at all yet.
However, the studio also raised its free cash flow expectations for the full year to at least $5 billion. Turns out that when you don’t have any actors or writers to make films or shows, you save a lot of money. Warner Bros thinks it will have around $1.7 billion in free cash flow for the third quarter due to the strikes and the runaway success of the Barbie movie.
What was the market reaction?
Despite the loss, Warner Bros Discovery’s share price still saw a 2.7% increase to $11.87 during Tuesday trading. Investors clearly liked the look of that extra free cash flow over the revenue loss.
Warner Bros Discovery’s share price is up 22% so far this year, with competitor Netflix, which has said it can financially handle the Hollywood strikes better than traditional studios, has seen a 52% gain. Rival Disney’s stock is down 8.7% in the same time period.
There may be some more trouble on the horizon for Warner Bros Discovery, given it’s had to postpone several blockbuster movies. Dune: Part Two will now be released next April instead of this November, with Godzilla x Kong: The New Empire and Lord of the Rings: The War of the Rohirrim released next year instead.
The bottom line
The studios have been taking the Hollywood strikes in their stride, but this is the first time we’ve seen a calculable loss from the strikes’ impact. We’d imagine without a deal in place and several of Warner Bros Discovery’s films pushed back, there will be further short-term financial hits the studio must suffer.
