Is Warner Bros. Discovery About To Make More Layoffs? Q2 Earnings Call Looms

Key takeaways

• Warner Bros. Discovery is rumored to be introducing more layoffs as more top executives leave the media company
• The actors and writers strike is set to drag on as rage over media companies advertising AI jobs has given the strike fresh momentum
• Warner Bros. Discovery’s stock price is up 37% this year, but could be hit by Q2 earnings released later this week

Media companies have been no strangers to hard times while the economic downturn has persisted, with many major studios making layoffs ranging from hundreds to thousands. Warner Bros. Discovery is rumored to be making more job cuts, potentially announced as part of this week’s earnings call, after more executives have left the company.

The streaming services are under siege right now with pressure to deliver new subscribers, deliver on cost-cutting promises to Wall Street and handle the actors and guild strike, which is newly enraged by AI media jobs cropping up. Despite everything, Warner Bros. Discovery’s stock is still up. Here’s the latest.

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What’s the latest at Warner Bros. Discovery?

Rumors are swirling around the media titan that more layoffs are coming after two high-level executives have departed. Warner Bros. Jim Keller, a senior ad executive at the company, has also departed the business. Keller was apparently in line to head up the company’s new ad sales team, created as part of Discovery’s acquisition of Warner Bros. last year.

Discovery’s senior vice president of internal comms, Kim Page, has also left the company. While there’s always churn in a big organization, Deadline reports there are allegedly small layoff rounds being conducted weekly for the foreseeable future.

The moves come as Warner Bros. Discovery has already made hundreds of job cuts in the last 12 months following the merger, including heavy losses in the ad sales department. So far both cable networks including the Discovery Channel, Science Channel and TLC have had jobs slashed, as have formerly Turner-branded networks such as TNT and TBS.

Warner Bros. Discovery has been looking to make $3.5 billion in savings since the Warner Bros. and Discovery merger was finalized last year in a bid to reduce its $50 billion debt load.

Have other streaming services made layoffs?

Pretty much every big streaming service or media company has made significant changes to its payroll in recent times. In February this year, Disney CEO Bob Iger announced a whopping $5.5 billion restructuring plan for the company which would involve making 7,000 layoffs, which happened in three rounds and completed last month.

Last year, Netflix
NFLX
confirmed it was laying off 300 employees in a second round of job cuts. The streaming service also made the controversial decision to end password sharing between households, which resulted in close to 6 million new subscribers in Q2.

In May, Paramount
PARA
said it would reduce its staff headcount by 25% across its Showtime, MTV Entertainment Studios and Paramount Media Networks divisions. NBC Universal also reportedly axed several hundred positions at the start of the year.

Could AI replace media jobs?

Another serious headwind media companies have had to deal with is the actors and writers strike, which has lasted three months and thrown off the production schedules of several hit TV shows and upcoming films. One of the key pain points is over the use of AI in the industry, with SAG-AFTRA, the biggest actors union, demanding strict regulation over the tech’s use to protect actors’ livelihoods.

So far the big studios have shrugged off the strike, but a new furore over AI job listings popping up from media companies reigniting fury amongst the unions. News spread like wildfire over Netflix listing an AI product manager position with a yearly salary of up to $900,000. Comedian Rob Delaney pointed out that the base salary could qualify 35 actors and their families for health insurance.

It might seem outlandish, but more AI-focused positions are popping up at almost every major company. Warner Bros. Discovery has several AI posts listed; Amazon
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is offering up to $300,000 for a senior project manager to work with generative AI, while Sony is reportedly paying $160,000 for an AI ethics expert.

From an investment perspective, AI represents potential significant cost savings for media companies that are still struggling to make up lost ad revenue – and in comparison to renegotiating contracts, which Moody’s predicts could cost media companies between $450-$600 million per year, the new tech could save them billions of dollars.

Introducing ad-supported tiers has somewhat alleviated the pressure; new research suggests the likes of Netflix and Disney have already amassed 100 million users on their ad-supported tiers, with $10 billion in revenue on the cards.

Wall Street’s reaction

Streaming services have had a tough year as ad revenue has dwindled in the face of a challenging economic backdrop, making layoffs inevitable. Warner Bros. Discovery is set to release its Q2 earnings beat later this week, with analysts predicting a 4% loss on GAAP revenue compared to last year to reach $10.4 billion.

The previous quarter was disappointing for the company, with advertising revenue sinking 17% and failing to beat new subscriber estimates. Even though the company beat revenue expectations, Warner Bros. Discovery recorded a net loss of over $1 billion.

After the last earnings report, Warner Bros. Discovery shares fell 4%, but the stock has gained 37% this year. A silver lining against streaming woes and layoffs has been the wild success of the Barbie movie, which collected $155 million in its opening weekend and became the best opening for a female director ever, with WBD shares lifting slightly after the opening weekend.

The bottom line

Whether or not Warner Bros. Discovery plans to make layoffs or not will likely be dictated by how well the second quarter went for the media giant. But it’s not alone – other studios and streaming services are feeling the heat just as much – but it’s possible that a company restructuring is on the cards.

For investors, who will certainly be watching this week’s earnings beat with interest, the question is whether Warner Bros. Discovery can deliver on its promise to save billions of dollars and reduce its debt load. Either way, the external headwinds mean the industry has a long way to go before it can breathe easier.

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