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Warner Bros. Discovery is happy with its Emmy Awards haul, even if it will take some more time to combine its two big streaming services into one that merges the best of both, CFO Gunnar Wiedenfels told an investor conference Tuesday.
Addressing the Goldman Sachs Communacopia + Technology Conference in San Francisco, he was asked about Monday night’s Emmy Awards. Wiedenfels lauded the company’s creative teams for an industry-leading 48 awards, led by HBO. He called that “a great backdrop” and “such great evidence” for how management looks at the merged firm as one company with much future upside. Ted Lasso and Abbott Elementary are also great Emmy-winning successes for the conglomerate, even if Warners produces them for Apple and ABC, respectively, instead of distributing them itself, he highlighted.
The merger provides “tremendous opportunity,” Wiedenfels said, mentioning House of the Dragon as an early example of how the expanded company can drive audiences to marquee content. The CFO mentioned that the HBO show’s first episode has now reached “well north of 30 million viewers,” the most successful launch in HBO history.
“Unfortunately, both are not perfect right now,” he said about the conglomerate’s two streaming services, with HBO Max having “that amazing content offering” and “a lot more of the must-have features,” while Discovery+ has a “cleaner” user experience. “We had to rebuild, taking the best parts of both platforms and rebuild a new state-of-the-art structure,” which will take some time, he said. The thesis behind that is that the two streamers are “perfect complements,” Wiedenfels said.
He also signaled again that while Discovery content traditionally doesn’t have “this extreme buzz” that drives hundreds of thousands or millions of people to a streaming platform, its evergreen popularity can help reduce user churn when HBO doesn’t have new hit shows launching, given that it has “among the lowest churn rates in the industry” and long view times. “There is a lot of value in the fact that we have HGTV, Food, Magnolia, Discovery and obviously on the other side HBO” as “established, very, very powerful brands” that are expected to be “a factor in the content discovery approach that we are going to take” for the combined streaming product, he also said. That was seen as a likely signal that the combined streamer would promote key content brands of the company, similar to how Disney+ showcases Walt Disney’s Marvel, Pixar and other brands.
The WBD CFO was also asked if the conglomerate sees its video gaming business, other units or real estate assets as noncore assets that could be sold. “We will obviously look at everything from the perspective of operating businesses,” he explained. “We want to take the time to have a thorough strategic discussion, so nothing for sale here right now.” He added that real estate is “part of our integration review, and we will figure out what the right strategy and the right footprint is.”
Wiedenfels has targeted $3 billion-plus in cost savings from the merger, with the executive reiterating Tuesday that $2 billion to $3 billion would be captured in 2023. For example, $6 billion-plus in non-content direct-to-consumer costs can be reduced by combining the two companies, he said.
But Wiedenfels didn’t get asked about or comment on a report that staff layoffs on the advertising business side of Warner Bros. Discovery are expected to start Tuesday. An Axios report said that the ad sales staff could shrink by around 30 percent over time, including layoffs and natural attrition of employees leaving and not being replaced, with reductions expected on both sides of the merged company, Discovery and WarnerMedia.
Asked if Warner Bros. Discovery is still discovering concerning trends about the former WarnerMedia, similar to its recent warning that key business trends were behind original pre-merger expectations, Wiedenfels said his team has not found any additional surprises, adding “frankly, we have found enough.”
The CFO reiterated Tuesday that the company’s U.S. streaming business would break even in 2024.
Wiedenfels had told a Bank of America investor conference Sept. 8 that, while the company has made tough choices with regard to its content investment and strategy, it remained committed to investing in and growing its content business. The surprise shelving of Batgirl was “blown out of proportion a little bit” though, he argued there. “Clearly the course corrections, making changes quickly where we don’t agree with the track that WarnerMedia was on, that took a lot of courage and execution early,” Wiedenfels said, adding of Batgirl specifically: “I don’t think it is unusual. We are a creative industry, and one of the elements of creativity is that there is judgment and views on what the potential of what a certain piece of IP might be.”
Wiedenfels at the Bank of America conference had also emphasized that the company’s creative leaders, such as film chiefs Michael De Luca and Pamela Abdy, make the content calls, but that “my team has helped them by providing financial data points where possible, and a framework to assess the potential from a financial perspective.”
Warner Bros. Discovery’s management has emphasized that while content cuts make a lot of headlines, the company expects most of its cost savings to come from other areas. The conglomerate took an $825 million write-down on content in its second quarter, which didn’t include Batgirl.
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