Warner Bros. Discovery Has Been “Really Shut Down” By Strikes, CFO Says, But Free Cash Flow Is Rising As Company Is “Unable To Deploy Capital” For Production

Warner Bros. Discovery CFO Gunnar Wiedenfels echoed recent sentiments from Netflix and other major TV and film producers, saying the industry must resolve the ongoing strikes and “get back to work.”

That’s easier said than done, of course, with the WGA and SAG-AFTRA both dug in and little movement in talks with the AMPTP. Predictions of a breakthrough by Labor Day have given way to pessimism about a deal getting done at all this fall. Appearing virtually at an investor conference hosted by BofA Securities, Wiedenfels called the strikes “an unfortunate situation.” WBD CEO David Zaslav, he said, “is spending a lot of his time with his peers on trying to resolve it as quickly as possible. Content is the backbone of what we do. We’ve got to get back to work, and we have to find a way to get to a solution that’s fair and makes everybody feel respected and rewarded fairly. That’s the No. 1 priority here.”

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Last week, the company stated in an SEC filing that its EBITDA would take a hit of $300 million to $500 million in 2023 due to the labor impasse. “From an operational/financial perspective,” Wiedenfels said, “we’re really shut down. There’s very little content production going on right now. I do think that we’re confident that there will be a solution, and once that happens we’re going to be ready to really get back to a normal production cadence as quickly as possible.”

The strikes have obviously taken a heavy toll on the third quarter and “potentially” will harm the fourth, the CFO said. At Warner Bros. Pictures, “you have to assume a slightly more conservative outlook” because not only are films being pushed into 2024 and beyond but talent is unavailable to promote 2023 releases. “On the flip side of that … from a free cash-flow perspective, short-term this is a benefit and we took the guidance north of $5 billion for this year because we’re just unable to deploy capital.”

While the labor situation is Topic A across the media business, Wiedenfels also covered a few other items of note. He addressed the company’s results in the upfront ad market (“a little more challenging in the past, but we did well”); the first 100 days of the Max streaming rebrand (“pleased” by churn reduction and viewer engagement); as well as the widely followed Charter-Disney carriage renewal. Charter “came out and said the solution they found with Disney could lead to stability for the ecosystem, and I think that’s a very valid and important point,” the exec said.

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