Warner Bros. Discovery Readjusts 2023 Financial Forecast, Admitting a Hit of at Least $300M Due to Strikes
The economic effects of the ongoing dual strike in Hollywood will be felt for years to come, as studios are forced to push release dates and empty full calendar seasons of their upcoming schedule because they can’t really promote their titles. (Expect more of these delays to be announced in the coming days.) However, as production is shut down, some companies were at least hoping to generate some positive headlines for their investors on Wall Street, whose feelings are all they care about. That may not be the case necessarily, Warner Bros. Discovery CEO David Zaslav announced on Tuesday.
In a new regulatory filing published on September 5, Warner Bros. Discovery has adjusted its 2023 earnings before interest, taxes, depreciation and amortization (EBITDA) forecast, as they anticipate a hit between $300M-$500M due to the impact of the stoppage. They are now expecting EBITDA’s lower limit to be around $10.5 billion-$11 billion.
However, the bottom line for Zaslav since he took over Warner Bros. Discovery in 2022 has been the free cash flow, the money the company can actually make once it’s subtracted the costs of doing business. In that same regulatory filing, WBD expects to hit $5 billion in free cash flow in the 2023 fiscal year, even hitting $1.7 billion in the third quarter alone thanks to the overperformance of Barbie at the box office (the film has now become the highest-grossing film ever for Warner Bros. in North America and worldwide).
The uptick in free cash flow comes, of course, because the company is not spending money on production at the moment, and it is seeing the returns of what it had already invested. But this is just a short-term fix, and the fact that they are not spending any significant money at the moment will likely be reflected in a decline in free cash flow in 2024 and even 2025. Wall Street hasn’t really taken note of this, as the stock has held steady after the announcement, and continuing a recovery after a slight nosedive late last week. Overall, it’s been on an upward trend all year long after massive hits in 2022.
The announcement comes on the heels of an earnings call in early August in which the company expected both strikes to be over by the beginning of September. We’ve been reporting for a few weeks that this was always the studios’ intention, to sign a deal with the writers by Labor Day to restart the pipeline and get the town’s engines moving again. But that strategy was counting on the fact that writers would be burnt out by now and in desperate need of a new deal that would get them back to work. That did not happen, as the WGA did not bow down to the AMPTP’s offer on August 11, which was a significant improvement upon what they had offered earlier, but still had some weak spots that the studios failed to address further.
It’s unknown when a deal with either guild will be signed, and there’s some speculation that after reaching an impasse with the WGA they will go back to the actors. The studios held a meeting last week to solidify their positions moving forward (there are heavy rumors of internal disagreements), but nothing has come out of it yet. On top of that, video game actors are also getting ready to strike, as SAG-AFTRA will be voting for strike authorization against 10 gaming companies between September 5 and September 25.
Miguel Fernández is a Spanish student that has movies as his second passion in life. His favorite movie of all time is The Lord of the Rings, but he is also a huge Star Wars fan. However, fantasy movies are not his only cup of tea, as authors like Scorsese, Fincher, Kubrick or Hitchcock have been an obsession for him since he started to understand the language of filmmaking. He is that guy who will watch a black and white movie, just because it is in black and white.
