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Warner Bros. Discovery earnings loom as reports swirl on layoffs, HBO Max restructuring

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Yahoo Finance's Alexandra Canal joins the Live show to discuss the shift in streaming for HBO Max as Warner Bros. Discovery gears up to report earnings, in addition to Paramount's second quarter results.

Video Transcript

AKIKO FUJITA: Well, HBO Max is on a cleanse. The streaming platform recently scrapping its film "Batgirl," as it's removed several Warner Brothers streaming-- several Warner Brothers streaming exclusive movies off the platform within the past few weeks. All of this as investors await Warner Brothers' earnings release.

For more on the streaming landscape, let's bring in Yahoo Finance's Allie Canal. And Allie, this is a company that is very much in cutting mode, right, slashing mode. Kind of restructuring is probably the right way to put it. What are we expecting?

ALEXANDRA CANAL: Yeah, and there's new reports from the Wrap that shows the development side of HBO Max is going to be hit with job cuts. About 70% of layoffs in the developing unit are expected. And that's leading to greater questions about what this means for the future of HBO Max.

If you're cutting jobs on the development side, on that content creation side, odds are you're going to probably scrap that original programming. There are rumors, reports that they're going to merge with Discovery+, completely gut HBO Max, draw a harder line between that scripted versus non-scripted content. So we'll see what kind of update we get on the earnings call.

But you were mentioning them scrapping the "Batgirl." This movie was nearly complete. It cost between $70 and $90 million to make, had an A-list cast, Michael Keaton returning as the Batman. And they just completely got rid of it. And that was surprising. In a statement, they said this was due to a strategic shift in where they wanted to take HBO Max.

So it just is leading to a lot of confusion. HBO Max was a service that I think a lot of people really enjoyed. It had really good quality programs. Like, "Mare of Easttown" was one of my favorites. So I think it's surprising that we're seeing this play out.

And I also want to bring up CEO pay because David Zaslav, the CEO of Warner Bros Discovery, he makes a ton of money. He signed a compensation package in 2021. And according to regulatory filings, that jumped to $246 million. That was significant compared to what he made in 2020 and 2019.

2020, only making nearly 38 million. 2019, 45.8 million, as you're seeing on your screen there. And that 2021 package takes him through the end of 2027. So he's cutting all these costs. And this is a major point of contention because he's consistently been one of the highest paid CEOs.

AKIKO FUJITA: Yeah, I mean, again, the backdrop really important, right? At a time when he's trying to cut costs, where's the salary going to go? Is there going to be pressure for him to take a pay cut as a result? We got Paramount earnings out this morning. I mean, this is another competitor. What stood out to you?

ALEXANDRA CANAL: Well, they beat on both the top and bottom lines. The stock is trading relatively flat right now. But after the results, it actually dipped. And I think that was because of the high cost of content. Their operating income fell by 33% in the quarter, down significantly from the year ago period. We know investors are increasingly focused on profitability, which is why I think we're seeing all these cost cutting measures at Warner Bros Discovery.

Also on the ad front, Wall Street has been really critical for Paramount when it comes to softening in ad sales and ad spend, especially as the economic downturn continues. So those are a few negatives. But overall, I thought it was a pretty strong report. Revenue, as I mentioned, a beat, surging 19% year over year. Big win in its film division with "Top Gun, Maverick."

They saw strong net adds for Paramount+. 4.9 million subs added in the quarter. They reiterated their guidance for subs. They were pretty bullish that they'll be able to continue to maintain momentum with their ad spend, given their model despite these various macroeconomic headwinds. So we'll see what happens with Paramount. But I think this is just a story that we're seeing throughout the streaming landscape right now. How can we cut costs? How can we improve that profitability? We'll see it moving forward.

AKIKO FUJITA: Well, and also to see how consumers are reacting, right, at a time when they're saying, well, I don't need all these streaming services at once. Allie Canal, thanks so much for that.