Warner Bros. Discovery is warning investors about the potential fallout from the Hollywood writers' and actors' strikes if they prolong into next year.
In a securities document published on Tuesday, September 5, the firm revealed that it had revised its forecasts in light of the assumption that the financial effect of the strikes would continue until the end of the year. The company stressed that this is not a projection for when the strikes will finish but rather an illustration of the financial toll being taken on its TV and film studios.
The actors went on strike with the Writers Guild of America (WGA) members in July, when the strike had already lasted over a hundred days. The strike has hit at a time when studios are seeking to turn a profit from their streaming services and are actively encouraging audiences to return to cinemas.
Anticipated Cost Implications
According to CNBC, Warner Bros. Discovery anticipates a drop in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $300 million to $500 million for the entire year, bringing the total to $10.5 billion to $11 billion.
On Tuesday, the company stated in a regulatory filing that although the firm hopes the strikes will finish soon, it has no way of knowing when they will conclude.
In recent months, negotiations between studios and writers have heated up, and Warner Bros. Discovery CEO David Zaslav has been involved.
Due to the labor strikes that jeopardize its marketing capabilities, Warner Bros. Discovery's Dune: Part Two was removed from the 2023 box office schedule last month. Originally scheduled for release this autumn, the picture has been pushed back to March 15, 2024.
This new release date comes at the expense of Godzilla x Kong: The New Empire, which will now open on April 12, 2024. The release date of the animated Lord of the Rings: The War of the Rohirrim was also changed to December 13, 2024.
CNBC also reported that there is an impact on Warner Bros. Discovery's free cash flow as a consequence of the strikes, which is reflected in the results. And now that Barbie has become Warner Bros.'s highest-grossing film, the studio has been able to increase its free cash flow projections for the year to at least $5 billion.
It is still the company's goal to achieve net leverage neutrality, they stated. Warner Bros. Discovery has begun making payments to reduce the substantial debt incurred as a result of the merger of Warner Bros. and Discovery in 2022.
Warner Bros. Discovery's previous projections had assumed the strikes would conclude in early September, according to CFO Gunnar Wiedenfels at the August earnings conference. He warned that the company's adjusted EBITDA and cash flow projections would be impacted if the strikes continued through December.
