The write-downs, which could grow to more than $2.5 billion, mainly involves Warner Bros Discovery’s (WBD) content portfolio. Some of those write-offs have been publicly announced, including the company’s decision to scrap several original programs intended for HBO Max as well as the much-anticipated film Batgirl, which was nearly finished.
In a regulatory filing on Monday, Warner Bros Discovery said it will incur more than $4 billion in overall restructuring charges. In addition to the content write-offs, those charges are expected to include severance packages given to departing executives and limited benefits paid to some laid off workers.
“As part of its plan to achieve significant cost synergies, in [the third financial quarter of] 2022, the company finalized the framework supporting its ongoing restructuring and transformative initiatives, which will include, among other things, strategic content programming assessments, organization restructuring, facility consolidation activities and other contract termination costs,” the company said in its filing with the Securities and Exchange Commission on Monday.
In plain English, here’s what that statement means:
- Strategic programming assessments: Warner Bros Discovery has already killed off a number of projects that were slated to debut in theaters, on HBO Max and on television. Additionally, the Turner side of the portfolio has incurred a steep reduction in programming, including the cancellation of scripted dramas and comedies. WBD said this led to $2 billion to $2.5 billion in write-offs.
- Organization restructuring: The company laid off workers, mainly on the Warner Bros side of the company, and particularly when similar jobs were already performed by staffers on the Discovery side. Executives from HBO Max and other parts of the Warner side have been faced with a quit-or-be-fired prospect. Most have resigned. WBD said this cost them $800 million to $1.1 billion in short-term spending.
- Facility consolidation activities: After all of that “organization restructuring,” WBD has fewer employees, so it doesn’t need all that office space that the separate Warner Bros and Discovery companies once enjoyed. Earlier this year, WBD sold the Discovery Technology Center in Tennessee and moved to a smaller space in Knoxville.
- Other contract termination costs: A phrase that means WBD ended certain contracts earlier than anticipated, or before WBD was able to fully satisfy its end of the bargain. That could mean WBD terminated the contracts of some of its executives early, or it could refer to WBD’s decision to pull certain titles (like “Sesame Street”) from its content platforms. It could also relate to the termination of some office leases, or that certain long-term services (like office refuse services, landscapers and food vendors) were canceled early. Tough to know.
Warner Bros Discovery is set to report its third-quarter financial earnings on November 3. It will be the second full financial quarter for the company since the Warner Bros side was spun off from AT&T earlier this year. AT&T’s shareholders still hold a majority stake in the venture.