Warner Bros. Discovery’s restructuring costs are starting to take shape.
On Monday, the company said in a securities filing that it expects to take $3.2 billion to $4.3 billion in pretax restructuring charges related to the WarnerMedia acquisition, including content-related writedowns of between $2 billion to $2.5 billion.
WBD has been engaged in what it has called a “global strategic review of content” since the WarnerMedia deal ended, canceling projects, halting development and shelving unproductive library content. In the first quarter after the deal closed, it disclosed an $825 million write-down on content, and a substantially similar number is expected in its third-quarter report.
Among the projects that were scrapped were those that were almost complete Bat girl film (which was developed for HBO Max), a Wonder twins movies and TV shows like Full frontal with Samantha Bee.
In addition to the high-profile content cancellations and abandoned development, the company has also laid off employees on a rolling basis, and various departments have seen cutbacks in recent months. Warner Bros. TV Group was affected earlier this month.
To that end, WBD says it expects organizational restructuring costs of between $800 million-$1[ads1].1 billion and facility consolidation and other contractual savings of between $400 million-$700 million.
Critically, the WBD filing suggests that around 70 percent of the $3.2-4.3 billion has been taken since the acquisition, meaning it has mainly been done with the strategic review of the company’s operations, although it adds that write-downs and restructuring . the effort “is expected to be substantially complete by the end of 2024.”
And the company also plans to save costs by merging its streaming services Discovery+ and HBO Max next year, which will enable the company to reduce the number of service providers it uses and consolidate some technical costs. It will also consolidate office space, although details of its future footprint in New York (where it has offices in both Hudson Yards and Park Avenue South) remain to be seen.
Monday’s filing is the clearest picture yet of the restructuring efforts being undertaken by the company, which originally promised $3 billion in cost savings from the merger.
The $2 billion plus content write-down is particularly eye-opening, and likely includes write-downs not only for the canceled and abandoned film and TV projects, but also WBD’s decision to remove some library programming from HBO Max.
Of course, the company will also continue to spend $20 billion or so on content each year, though executives have told analysts they expect to spend the money “smartly” and to “drive for the highest level of financial discipline here to ensure that every dollars spent are targeted and measured, says CFO Gunnar Weidenfels.
At a town hall last month, WBD CEO David Zaslav and other top executives acknowledged the “disruption” and “difficulty facing all media companies” in the current environment, and also the “challenges” of integrating WarnerMedia and Discovery.
However, he reiterated that the company is “absolutely not for sale” and that it expects to be competitive as a pure content company with its current assets.