(Reuters) – The box office success of the film “Barbie” helped Warner Bros. Discovery beat quarterly profit estimates, but two Hollywood strikes and a weak advertising market could weigh on its profits next year, warned the group’s leaders on Wednesday.
These less than encouraging prospects caused Warner Bros shares to fall by almost 17% on the New York Stock Exchange.
While Hollywood film and television writers ratified a new three-year contract in September ending their 148-day strike, members of the SAG-AFTRA actors’ union have continued their walkout since July, disrupting programming of films for 2024 and deprives media groups of new content to sell.
Chief Financial Officer Gunnar Wiedenfels signaled in a conference call with investors a “real risk” that the financial consequences of the strike could extend into 2024.
“It is becoming increasingly clear that, just like 2023, 2024 will have its share of complexity, particularly regarding the possibility of continued weak advertising,” said Gunnar Wiedenfels. “We don’t see when the situation will be reversed.”
Chief executive David Zaslav said production of original content had been weak and some releases had to be postponed, leading to a drop in subscribers to its streaming services in the third quarter.
According to Gunnar Wiedenfels, the group will see “a few hundred million dollars” of negative impact on its EBITDA due to the effects of the strike, and “several hundred million dollars” of positive cash flow due to the drop in production expenses.
“The big success of the Barbie movie may be a once-in-a-lifetime event that won’t happen again for a few years,” said Michael Schulman, chief investment officer at Running Point Capital.
The group born from the merger of WarnerMedia and Discovery posted adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $2.97 billion (€2.78 billion) in the third quarter, above expectations at 2 .92 billion dollars, according to LSEG data.
The group’s revenue reached $9.98 billion in the third quarter, in line with estimates.
Warner Bros reported free cash flow in the period of $2.06 billion, up from $1.72 billion in the previous quarter.
The group reported a net loss of $417 million, down from the previous year’s net loss of $2.3 billion.
(Writing by Samrhitha Arunasalam in Bangalore and Helen Coster in New York; French version Dagmarah Mackos, edited by Kate Entringer and Blandine Hénault)
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