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Warner Bros. Discovery (NASDAQ:WBD) has famously started ratcheting back on the content-spending arms race that marked the arrival of hot streaming-video competition – but the company is pushing back on the idea that the cutbacks mark any sort of retreat from content that works.
“I want to clarify something: I view this as having shaved off that excess,” Chief Financial Officer Gunnar Wiedenfels told a Morgan Stanley investor conference Wednesday. “We didn’t abandon anything that made sense strategically, or financially,” despite some criticism particularly from the press.
Rivals seem to be following suit, making their own cutbacks after a period of “streaming exuberance,” he said.
Now after a rough 2022, the worst effects from the creation of the company (via the merger of AT&T’s WarnerMedia with Discovery Inc.) are behind, Wiedenfels suggested. WarnerMedia was “never managed with a cash focus,” but now cash flow and sustainability are the watchwords in what CEO David Zaslav has called a “year of building.”
In the fourth-quarter earnings call, Zaslav emphasized that the company had levers for cash flow even as net leverage drops from an end-of-2022 5.0x to “clearly below four times” by the end of 2023.
Zaslav also made news in the earnings call by saying the company had a deal to make “multiple” Lord of the Rings movies, and Wednesday, Wiedenfels suggested the company wouldn’t sleep on mining its most successful properties.
Not only will there be those Lord of the Rings films “over time,” Wiedenfels hinted, but the upcoming revamp to its DC Universe is an “enormous opportunity” now that Peter Safran and James Gunn are in charge. And the company wants to capitalize on Harry Potter as well: “Take Harry Potter as an example, the Wizarding World, the fact that we are enjoying this massive success with the Hogwarts Legacy launch, 12 years after the last film came out, shows that there is so much opportunity and we’re only just starting to expand that.”
