Warner Bros Discovery expects to write off as much as $2.5bn because of shelved shows and movies along with other programming decisions, as chief executive David Zaslav looks to cut billions of dollars in costs.
After the merger of Warner with Discovery, Zaslav has represented a return to budget discipline following an era of extravagant spending in Hollywood. His team has been scouring the sprawling entertainment group — which includes HBO, the Warner movie studio and CNN — for $3bn in cost cuts over the next two years.
Warner warned in an SEC filing on Monday that restructuring costs could total up to $4.3bn through 2024, including between $2bn and $2.5bn in charges because of “strategic content programming assessments”.
The company has already incurred more than half of the restructuring charges it outlined on Monday. Warner wrote off $1bn in restructuring costs in the second quarter and expects to report between $1.3bn and $1.6bn in charges in the third quarter.
These charges are related to decisions not to move forward with shows already in development, pulling existing shows or movies from the HBO Max streaming platform, or changing the release strategy for programming, said a person close to the situation. The group is “overwhelmingly done” with these changes, the person said.
Under Zaslav’s watch Warner has cancelled high-profile projects including a nearly completed movie, Batgirl; JJ Abrams’s HBO series Demimonde; and a CNN streaming service, CNN Plus. Batgirl’s directors Adil El Arbi and Bilall Fallah had publicly expressed disbelief with the decision.
Zaslav has vowed to adopt a “more sensible” approach to budgets and pricing, after what he described as the “spend, spend, spend and charge very little” approach taken in recent years as media groups fixated on streaming growth.
“It was a reaction to the capital markets — let’s go ahead and collapse businesses and overspend on content,” Zaslav said when the company’s last quarterly earnings were released in August.
Warner Bros Discovery has cut estimates for operating profits this year to between $9bn and $9.5bn, blaming the more difficult outlook for advertising, overspending on streaming content and a budget position that was worse than what was disclosed pre-merger.
A Warner Bros Discovery spokesperson declined to comment.