Content tax write-offs are over at Warner Bros Discovery as CFO once again blasts entertainment business for spending frenzy

According to CFO Gunnar Wiedenfels, Warner Bros. Gone are Discovery’s days of removing content for tax purposes.

After a series of brutal destruction in 2022, including the closure of a big-budget tentpole bat girlDeath of JJ Abrams HBO drama half the worldClub TBS series like The big D, Chad and Kill the orange bear as well as a number of cancellations incl Western worldsaid Wiedenfels, “We are done with this chapter.”

Speaking at a Citibank media conference, the manager also took the opportunity to chide the entire industry for its waste. When asked by moderator and veteran Citi analyst Jason Bazinet where the company sits on the spectrum of direct-to-consumer and wholesale content production for distribution by others, Wiedenfels replied, “The truth is somewhere in the middle. He has the quoted CEO David Zaslav’s statement during Netflix’s early 2022 humiliation, when Wall Street was recalibrating its standards for the streaming business, that WBD was “not looking for the spending wars” in the industry.

While executives tried to reduce the cost of the operation, Wiedenfels said it took “a while to make sure we were doing it right,” which is why the process took six to seven months.

“It was very important for all of us to really use 2022 to get through acquisition accounting, get through those initial strategy changes, get it all, get it all out in terms of our recovery estimates and then be able to turn the page and beyond ,” he added.

WBD “had a lot of publicity about the content removals that we did,” the CEO continued. It is “a reflection of an industry that has gone overboard and gone insane. There was a lot of thinking about “let’s do more, more, more”, not necessarily “let’s do exactly the right things, let’s do what works”.

The company predicted it would realize $3.5 billion in cost savings from the merger. It is of course possible that additional write-offs will occur in the normal course of business, but the specific merger-related decisions have been finalized. Members of a revamped management team, albeit with some holdovers from when AT&T owned WarnerMedia, “have gone in,” Wiedenfels said. “You stock up. It’s a new day. You see what works and what doesn’t.”

WBD’s share price decline in recent months reflects widespread uncertainty about the merger. They fell below $9 late last year, from nearly $25 when the deal closed last April, although this week brought more encouraging news as 2023 begins. The stock rose about 6% today to about $11 in midday trading.

Regarding further cost savings once the content write-offs are completed, Wiedenfels echoed Zaslav’s earlier assertions that no “strategic asset sale” was on the horizon. “There’s also opportunity” for more decorations, he said. “There is a property portfolio where there may be better structures for us to generate liquidity. We analyze those less visible, non-core parts of the portfolio.”

While the company has significant debt of about $50 billion ($47 billion net), Wiedenfeld said he was “satisfied” with the company’s capital structure. There are no debt payments and interest rates are cheap, he said.