Warner Bros. Discovery reports that it will incur up to $1.5 billion in costs to downsize the business, cancel programming and provide severance packages to laid-off workers, among other expenses.
In a filing Monday with the Securities & Exchange Commission, the company warned that “estimated cash expenditures for organizational restructuring, facilities consolidation activities and other contract termination costs will be order of approximately $1.0 to $1.5 billion”.
Costs will be spread over more than two fiscal years.
Executives, including CEO David Zaslav, have long signaled that they will continue an aggressive cost-cutting effort to meet previously announced financial targets.
Zaslav, as part of Discovery’s consolidation of WarnerMedia, promised Wall Street that he and his lieutenants would find $3 billion in annual savings after the merger.
Telecommunications giant AT&T decided to leave Hollywood in a hurry, divesting its entertainment portfolio, including HBO, Warner Bros. film and television studio, CNN, TBS and Turner Classic Movies, among other properties, to Discovery in April .
Since then, the smaller Discovery has struggled to swallow the larger company at an inopportune moment, as Wall Street treats streaming companies with more skepticism. The renowned Warner Bros. Discovery is struggling with a depressed stock price.
The transaction, which saw AT&T and Discovery shareholders receive shares of Warner Media Discovery, has overwhelmed Warner Bros. Discovery of over $50 billion in debt. Much of the debt was left over from AT&T’s takeover of the former Time Warner Inc. in 2018.
Since April, the company has let hundreds of employees endure multiple rounds of layoffs. In August, around 70 people were cut from its crown jewel, HBO, or 14% of its staff. Earlier this month, more than 80 workers were laid off from studio Warner Bros. TV. Cuts are expected at the movie studio next month.
The New York and Burbank-based entertainment giant also canceled movies and TV shows, including dumping the $90 million ‘Bat Girl’ movie, selling much of its CW network stake and slowing down some program commands.
Warner Bros. Television closed its Television Workshop for Emerging Writers and Directors, then quickly dropped the closure amid outrage from those who complained the move would be a major setback for women and people of color trying to launch a career in Hollywood.
During the second fiscal quarter, the company took about $1 billion in pretax restructuring charges.
Warner Bros. Discovery will release its fiscal third quarter results on November 3. On Monday, he told investors the report would include $1.3 billion to $1.6 billion in pretax writedowns, mostly content-related.
Ultimately, the company expects to incur between $3.2 billion and $4.3 billion in pretax restructuring charges through 2024, according to the filing. Most of these charges have already been taken.
The company is also considering terminating contracts and consolidating facilities, which could result in accounting fees of $400 million to $700 million, depending on the filing. It is unclear which buildings the company plans to leave.
Next year, Warner Bros. aims to consolidate its two streaming services – HBO Max and Discovery+ – but executives did not detail the costs associated with that.
The shares closed Monday at $13.18, up 2.3%, although the stock has lost nearly half its value since the April merger.