Warner Bros. Discovery’s earnings call zeroed in on the entertainment conglomerate’s long-terms goals and a well-founded plan-of-action as the company battles consolidation challenges. The newly combined Warner Bros. Discovery had an eventful Q2 that raised plenty of questions surrounding its structure and revenue streams.

The three-month-old company lost $3.4 billion in its first-ever quarter. It should be noted that this figure includes about $1 billion in restructuring, another $1 billion in transaction and integration expenses, and $2 billion in the amortization of “intangibles.” Here’s a complete breakdown of Warner Bros. Discovery’s Q2 earnings:

• Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was a refreshing $1.66 billion.
• A total of 92.1 million subscribers across the globe.
• A disappointing revenue of $9.82 billion.

The company said it ended Q2 with 92.1 million subscribers across its streaming platforms, up from 1.7 million the previous quarter. It expects to see 130 million global streaming subscribers by 2025.

Shares of Warner Bros. Discovery fell in late trading after the company reported its first combined financials featuring a dismal net loss, disappointing revenue, heavy debt and sluggish streaming growth.

Warner Bros. Discovery Announces Ten-Year Reset at Q2 Call

Warner Bros. Discovery’s earnings report for Q2 puts an end to weeks of speculation in Burbank and New York as rumors revolved around its deep cuts, the removing of content from HBO Max and which programming could undergo the axe.

Analysts have also been looking to see how the newly minted company will balance debt obligations, supply-chain challenges, and advertising market headwinds as it tightens its belt on content speed.

The merger of WarnerMedia and Discovery, which created the entertainment conglomerate with many former Discovery executives at the leadership, was finalized in April. Many analysts expect that the $3 billion in cost cuts that CFO Gunnar Weidenfels and Zaslav have pledged to uncover will be conservative.

Just a few weeks after it launched, the company canceled CNN+ and drastically reduced the amount of scripted programming on TBS and TNT, favoring sports and unscripted content instead.

The startling decision to scrap two films that were in development for HBO Max — a Scooby Doo movie and Batgirl, a $90 million DC Comics movie that had already wrapped principal photography and was in postproduction — was revealed by the company this week.

‘Want to Mirror Marvel Studios’ Success’

During Warner Bros. Discovery’s Q2 earnings call, CEO David Zaslav revealed the reasons why DC movies will now follow the Marvel Studios model as well as the new framework that will be used for them.

In addition to top Warner Bros. Discovery executives JB Perrette (CEO & President, Global Streaming and Games), Gunnar Wiedenfels, and Andrew Slabin, Zaslav spent the call explaining to investors how they saw Warner Bros. differently than the previous AT&T regime as a film and TV studio.

 “We have done a reset. We’ve restructured the business. We’re going to focus where there will be a team with a ten-year plan focusing just on DC.”

David Zaslav, CEO, Warner Bros. Discovery

Zaslav spent the whole call downplaying streaming as a key revenue stream.

On the call, Zaslav stated, “We have a different view on the wisdom of releasing direct to streaming films. We have taken some aggressive steps to course correct the previous strategy. With respect to streaming, our main priority right now is launching an integrated SVOD service.”

Zaslav provided details on the newly minted HBO Max and Discovery+ streaming service that is scheduled to debut in the US in the summer of 2023. In 2023 and 2024, it will enlarge into additional markets. (This new platform’s name wasn’t made public.) A free, ad-supported version is also planned.

A large part of the Warner Bros. Discovery’s earnings call was spent on financial projections now that the company has adopted a structure similar to the one holding up Marvel Studios.

“We have done a reset. We’ve restructured the business,” he said. “We’re going to focus where there will be a team with a ten-year plan focusing just on DC. It’s very similar to the structure that Alan Horn and Bob Iger put together very effectively with Kevin Feige at Disney. We think that we could build a long term, much stronger, sustainable growth business out of DC.”

A Long Way Ahead

Despite the expansion plans, analysts expect the streaming conglomerate’s efforts to combine the two businesses, boost free cash flow, and deleverage its balance sheet will result in chaotic quarters in the future.

In the past, Warner Bros. Discovery has stated that it expects to slash $3 billion in expenditures over the next two years and investing the savings in streaming content.

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