Industry Insider: Warner Bros. Discovery Stockholders
For most of history, annual stockholder meetings were monotonous formalities put on by companies as a way to include their shareholders and reveal upcoming plans. While the basic premise has not changed throughout the twentieth and twenty-first century, companies like Warner Bros. Discovery have taken a more hands-on approach to these meetings; they allow shareholders to ask questions, raise concerns, and vote on important issues, such as the election of board members and significant corporate policies. These annual meetings build trust and confidence among investors, ensuring they are well-informed about the company's operations and prospects. Luckily, these meetings are also open to the public. Thus, A Hot Set will analyze the 2023 Annual Report of Warner Bros. Discovery, highlighting its key aspects, and then present upcoming projects through the recent 2024 stockholder meeting.
David Zaslav, the CEO of Warner Bros. Discovery (WBD) opened the annual report with a statement:
“We are still in the early innings of a multi-year transformation, and we’re putting points on the board that are helping to better position our business for the future. We recognize that in today’s disrupted and rapidly evolving media environment, business as usual won’t suffice and companies that want to endure and thrive must continuously innovate…”
In 2023, WBD was not immune to adversity. First, they had to manage substantial debt post-merger when WarnerMedia merged with Discovery in 2022, creating Warner Bros. Discovery. This event strategically positioned them to get an upper-hand in the streaming wars by facing the formidable Netflix head-on – and other smaller streaming platforms as well. While this puts WBD in a position to catch-up, or at least manage, their competition with other streaming companies, it would be a while before they are actually able to do so. Ultimately, there is still an uphill battle WBD has to climb. Integrating HBO Max and Discovery+ to create Max was another way to fill in the gap. Stakeholders have not yet seen the fruition of these plans.
Despite these shortcomings, Zaslav lists the accomplishments and plans in the 2023 report, including paying more than $12.4 billion in debt and generating around $9.2 billion in free cash flow — this was the result of the 2022 merger deal with Discovery Inc.’s acquisition of WarnerMedia mentioned earlier. So, nothing significantly new. Zaslav claims that WBD is in a position to “continue to deliver in 2024.” He goes on to list the three strategic pillars of the company, citing that these idea has helped growth:
Be the home of the best and most compelling stories and storytellers
Share our stories, characters and worlds with the broadest global audience possible, across multiple products, while maximizing their overall value
Operate with a One Company mindset fueled by a strong, unified culture
Zaslav’s optimistic enthusiasm is not all bravado. Warner Bros. Discovery had an excellent 2023 summer with the Barbie movie release, creating the Barbenheimer phenomenon that elicited $1.4 billion worldwide. WBD already had a strong year, however, claiming over 30% share of the major studio domestic market with Dune: Part Two and Godzilla x Kong: The New Empire. Additionally, WBD had the #1 game released globally with Hogwarts Legacy.
These successes have eased the concerns of many stockholders as WBD continues to innovate and refine their content; similar to many other large media conglomerates, WBD is trying to expand on popular franchises. For example, Furiosa: A Mad Max Sage released in May 2024, adding to the popular Mad Max series, Beetlejuice Beetlejuice is set to release as the sequel to the original 1988 Beetlejuice, and the long-awaited Joker: Folie a’ Deux is also set to release in October 2024, ultimately revealing WBD’s massive content dump of to-be-expected hits.
As many consumers and stockholders know, cord-cutting has been rampant since the streaming wars began. It is clear that WBD is not shying away from cord-cutting and, instead, is embracing the idea. Which is why their focus has mainly been on improving their streaming services:
“Our north star in streaming is profitable growth, and having completed our first full year on this multi-year journey to $1B of Adjusted EBITDA by 2025, we are pleased to have already achieved a profitable streaming business with a $2B+ year-over-year turnaround in Adjusted EBITDA for the DTC segment from 2022 to 2023.”
While it seems as if they all but abandoned their ties with supporting their cable and satellite services, they address the problem of losing their linear advertising market with cable-cutting. Their solution includes a lack-luster cross-promotion between sports networks and streaming services. They also claim that they have a “cross-platform content engine” where consumers are watching the series both on US networks and their streaming – examples of this being The Curious Case of Natalia Grace and Rick and Morty. While it's more of an excuse for WBD to focus on streaming instead of pay-TV, who can blame them amidst the streaming frenzy?
Ultimately, Warner Bros. Discovery is navigating a pivotal transition in its history. The company is pouring resources into creating innovative content and expanding its streaming platforms to compete in the digital landscape. However, alongside these efforts, it must also address significant financial challenges, including easing its substantial debt burden. Finally, the ongoing shift away from traditional linear TV presents another hurdle; the company must find ways to adapt to the changing advertising market and leverage its streaming services to offset the revenue loss from traditional pay-TV. Balancing these priorities is crucial for sustaining long-term growth and stability.
