Warner Bros. Discovery to Take up to $4.3 Billion in Post-Merger Restructuring Charges, Including up to $2.5 Billion in Content Write-Offs

Todd Spangler
·3 min read

Warner Bros. Discovery, trying to right-size its cost structure on the balance sheet, said it will incur a total of between $3.2 billion and $4.3 billion in pre-tax restructuring charges related to Discovery’s acquisition of WarnerMedia.

The media company disclosed expected ranges for the charges in an SEC filing Monday. For the third quarter of 2022, WBD estimates it will incur $1.3 billion to $1.6 billion of restructuring charges primarily attributable to content write-offs.

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“As part of its plan to achieve significant cost synergies, in Q3 2022, the company finalized the framework supporting its ongoing restructuring and transformation initiatives which will include, among other things, strategic content programming assessments, organization restructuring, facility consolidation activities and other contract termination costs,” WBD said.

Per the filing, the total charges — to be incurred across multiple quarters, spanning Q2 2022 through Q4 2024 — are expected to comprise:

  • “Strategic content programming assessments,” leading to content impairment and development write-offs, of $2.0 billion to $2.5 billion;

  • Organizational restructuring costs, including severance, retention, relocation and other related costs, of $800 million to $1.1 billion; and

  • Facility consolidation activities and other contract termination costs of $400 million to $700 million.

Of those amounts, the estimated cash expenditures from the organizational restructuring, facility consolidation activities and other contract-termination costs will be between $1.0 billion and $1.5 billion, WBD said.

The company had incurred $1 billion of pre-tax restructuring charges in Q2 2022, as well as more than $2 billion in amortization of various assets. That led Warner Bros. Discovery to post a net loss of $3.4 billion on revenue of $9.82 billion for the quarter.

WBD is scheduled to report Q3 earnings on Thursday, Nov. 3, after the market closes.

Layoffs at Warner Bros. Discovery during the third quarter included about 100 staffers let go in its ad-sales group last month and about 70 HBO/HBO Max employees in August (a move that included disbanding HBO Max’s reality programming team). CEO David Zaslav has told investors the company expects to achieve $3 billion in cost-saving synergies in the first two years following the merger’s completion in April.

“While the company’s restructuring efforts are ongoing, including the strategic analysis of content programming which could result in additional impairments… the restructuring initiatives are expected to be substantially completed by the end of 2024,” Warner Bros. Discovery said in the filing.

The content write-offs include “Batgirl,” the $90 million Warner Bros./DC movie starring Leslie Grace in the title role, which WBD axed after determined that taking a tax write-off for “Batgirl” made more financial sense than releasing it commercially. (WBD CFO Gunnar Wiedenfels has said the backlash over “Batgirl” was “blown out of proportion.”)

The media company also has canceled several HBO Max projects, including Greg Berlanti’s DC series “Strange Adventures” and a “Wonder Twins” live-action movie. HBO Max also removed other content including teen drama series “Generation,” animated anthology series “Infinity Train” and kids’ show “Summer Camp Island,” as well as 200 older “Sesame Street” episodes.

WBD noted that the estimated charges and costs it outlined Monday “are subject to a number of assumptions” and that actual results “may differ materially as a result of various important factors,” including due to the risks and uncertainties it includes in its financial filings.

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