HBO Max/Discovery+ Merger

[navychop]

Yes, the tax attorney who is either a bad tax attorney or is intentionally trying to mislead people. Correct. There is literally no other alternative.

I suspect selective quoting.

 

[Bruce]

I suspect selective quoting.

The Tax Attorney wrote the blog/article.

 

[navychop]

a Tax Attorney, which you are not

Don’t be so sure. Yes, there are tax specialists- CPAs as well as lawyers. And a few who are both.

In any event, all of us in accounting must have a certain minimum level of tax knowledge. And this write off business ain’t rocket science.

The fiddling comes from allocating costs to different productions, and income estimates. Frankly, every business must determine if future income will cover their costs.

 

[navychop]

The Tax Attorney wrote the blog/article.

I do not believe we saw the entire article.

 

[Bruce]

Don’t be so sure. Yes, there are tax specialists- CPAs as well as lawyers. And a few who are both.

In any event, all of us in accounting must have a certain minimum level of tax knowledge. And this write off business ain’t rocket science.

The fiddling comes from allocating costs to different productions, and income estimates. Frankly, every business must determine if future income will cover their costs.

Since my employment has absolutely nothing to do with taxes, only Statistics/Analytics , basically trends of where things are going with this damn business, I always defer to the experts.

But what I do know, that the rumors are Warner/Discovery is desperate for cash right now, so it makes sense that are doing everything they can now to do that and damn the future.

 

[Bruce]

I do not believe we saw the entire article.

I linked it, here it is again.

Was The 'Coyote vs. Acme' Movie Canceled For Tax Purposes? - Above the Law

Studios generally do not make movies just lto create tax write-offs. Wile E. Coyote had no comment. The Road Runner was traveling and unavailable for comment at press time.

abovethelaw.com

 

[navychop]

“…It should be noted that WB will get a tax write-off regardless of whether “Coyote vs. Acme” is released. The difference is how the tax write-off will be applied...”

Side note: Actors and some others are often paid a percent of gross, or profits if that’s all they can wangle. So no release, no gross, no pay beyond some fixed minimum they contracted for.

 

[Bruce]

“…It should be noted that WB will get a tax write-off regardless of whether “Coyote vs. Acme” is released. The difference is how the tax write-off will be applied...”

then this…

If the movie is not released (or ends up being unprofitable), the write-offs will offset profits from WB’s other projects such as the summer hit movie “Barbie” or the best-selling (and controversial) video game “Hogwarts Legacy.”

And again, all I posted were Write Offs, I never have explained in my opinions/postings how they would be applied or if they can be.

Just Warner is receiving a Tax write Off,

 

[navychop]

The offset is across the company. Total profits.

 

[Juan]

Yes, the tax attorney who is either a bad tax attorney or is intentionally trying to mislead people. Correct. There is literally no other alternative.

Or misquoted in the article

 

[Bruce]

Or misquoted in the article

He wrote it, read the above post.

 

[NashGuy]

But what I do know, that the rumors are Warner/Discovery is desperate for cash right now, so it makes sense that are doing everything they can now to do that and damn the future.

Weren't you posting several months ago that your sources were saying that WBD was going to run out of cash or go bankrupt by the end of 2023?

 

[Bruce]

Weren't you posting several months ago that your sources were saying that WBD was going to run out of cash or go bankrupt by the end of 2023?

They are almost out of cash, another billion less.

And I said they could be looking at a bankruptcy if they could not handle the debt, which they did get paid down some, but I never gave a date.

Debt is now at $43 Billion with a Market Cap of 28 Billion.

by the way, another movie flop with Aquaman 2, costs was over $350 million with marketing , so it has to make about a Billion to break even

Wonka seems like a hit, but it is not, budget was $125, Marketing was $100 to $125 million, so it has to make over $700 Million to break even

• Warner Bros Discovery cash on hand for the quarter ending September 30, 2023 was $2.383B, a 1.61% decline year-over-year.
• Warner Bros Discovery cash on hand for 2022 was $3.731B, a 4.46% decline from 2021.

Then their net income-

• Warner Bros Discovery net income for the quarter ending September 30, 2023 was $-0.417B, a 81.93% declineyear-over-year.
• Warner Bros Discovery net income for the twelve months ending September 30, 2023 was $-4.827B, a 7.74% decline year-over-year.
• Warner Bros Discovery annual net income for 2022 was $-7.371B, a 832.7% decline from 2021.

Operating Income

• Warner Bros Discovery operating income for the quarter ending September 30, 2023 was $0.097B, a 104.43% decline year-over-year.
• Warner Bros Discovery operating income for the twelve months ending September 30, 2023 was $-3.260B, a 34.38% decline year-over-year.
• Warner Bros Discovery annual operating income for 2022 was $-7.37B, a 466.3% decline from 2021.

https://www.macrotrends.net/stocks/charts/WBD/warner-bros-discovery/operating-income

 

[Juan]

He wrote it, read the above post.

View attachment 167593

Who wrote it?

 

[lakebum431]

They are almost out of cash, another billion less.

And I said they could be looking at a bankruptcy if they could not handle the debt, which they did get paid down some, but I never gave a date.

Debt is now at $43 Billion with a Market Cap of 28 Billion.

by the way, another movie flop with Aquaman 2, costs was over $350 million with marketing , so it has to make about a Billion to break even

Wonka seems like a hit, but it is not, budget was $125, Marketing was $100 to $125 million, so it has to make over $700 Million to break even

• Warner Bros Discovery cash on hand for the quarter ending September 30, 2023 was $2.383B, a 1.61% decline year-over-year.
• Warner Bros Discovery cash on hand for 2022 was $3.731B, a 4.46% decline from 2021.

Then their net income-

• Warner Bros Discovery net income for the quarter ending September 30, 2023 was $-0.417B, a 81.93% declineyear-over-year.
• Warner Bros Discovery net income for the twelve months ending September 30, 2023 was $-4.827B, a 7.74% decline year-over-year.
• Warner Bros Discovery annual net income for 2022 was $-7.371B, a 832.7% decline from 2021.

Operating Income

• Warner Bros Discovery operating income for the quarter ending September 30, 2023 was $0.097B, a 104.43% decline year-over-year.
• Warner Bros Discovery operating income for the twelve months ending September 30, 2023 was $-3.260B, a 34.38% decline year-over-year.
• Warner Bros Discovery annual operating income for 2022 was $-7.37B, a 466.3% decline from 2021.

https://www.macrotrends.net/stocks/charts/WBD/warner-bros-discovery/operating-income

You have to look at why their cash is down. I know that you aren't strictly a financial person, but come on. They paid down $4.2B of debt. FCF is what matters for them, which is just fine. In fact, as they said on their last earnings call, they are considerably ahead of scheduled debt pay back already. That's not to say they don't have problems. The entire US ad sales market on linear television is terrible right now. Lots of dollars have shifted to digital (e.g. Meta, Amazon, Google). I'm sure that is a huge hit to their 4th quarter as well given the heavy mix of linear television in their portfolio.

Also, your numbers on film profitability are waaaay off. Let's say that your numbers of cost and marketing are correct for Wonka (the industry stuff I read says lower marketing and film cost, but let's just pretend you're right). If it cost $125m to make and they spent $100m in marketing, then that is $225m marketed cost. I don't know how much you know about the split by country between the studio and the theaters, but it is super complicated and different country by country. As of right now, the global box is right at $392m (Wonka). Only $11.9m of that is in China where only about 55% goes back to the studio. Everywhere else is between 65-85%. So even at a blended 60% (outrageously conservative in this case because of the low China numbers) there is already a profit based on your cost numbers of $10m. It still seems to be doing well with nothing really coming out and has some box office tail left. That also doesn't incorporate the next windowing groups (PPV, streaming, etc.) where essentially all the revenue goes to the bottom line. I know that you focus on Disney with your job, but the other studios are quite different in their approach (not saying that is good or bad, but you can't apply the same metrics to a moderately costed musical that you do to a high cost Marvel movie).
I don't see any possible scenario of bankruptcy unless the cable industry completely crumbles and all of the cash flow from the linear networks go completely away.

 

[Bruce]

You have to look at why their cash is down. I know that you aren't strictly a financial person, but come on. They paid down $4.2B of debt. FCF is what matters for them, which is just fine. In fact, as they said on their last earnings call, they are considerably ahead of scheduled debt pay back already. That's not to say they don't have problems.

They have massive problems coming up, one big hit at the movies ( and I heard Mattel gets a super cut of that money), but per sub fees on their cable channels gets less and less, no big TV hit right now, their most profitable shows are still the Food Network/HGTV types( so inexpensive to produce), but those are the most affected by the loss of per sub fees.

Syndication is still paying well, but more diminished.

The entire US ad sales market on linear television is terrible right now. Lots of dollars have shifted to digital (e.g. Meta, Amazon, Google). I'm sure that is a huge hit to their 4th quarter as well given the heavy mix of linear television in their portfolio.

I have posted that here a few times, it is bad for all Traditional Television, I have heard as much as 50-75% for programming spots that is not Football, which is still generating good ad revenue , but NFL is largely considered a loss leader during the Regular Season, revenue picks up during the playoffs since they are national broadcasts, big time during the Super Bowl, but that is only every 4 years now for the Networks.

But there is an election coming up, that will really help with Ad Revenue for about 5 months this year for all, local, Network, cable channels and of course streaming, thanks to targeting.

Also, your numbers on film profitability are waaaay off. Let's say that your numbers of cost and marketing are correct for Wonka (the industry stuff I read says lower marketing and film cost, but let's just pretend you're right). If it cost $125m to make and they spent $100m in marketing, then that is $225m marketed cost.

From the link I will post at the bottom-The film's $120 million budget, combined with an assumed marketing budget of over $100 million,

So it could be $110 or more, thought $125m was fair, ‘over‘ in Hollywood speak is always a wacky number, usually means they do not want the real number out.

I don't know how much you know about the split by country between the studio and the theaters, but it is super complicated

Yes it is, I know for certain movies, the studios get a higher percentage for the first few weeks, I read that for Avengers Endgame, the studio received 90% of the box office for the first 4 weeks.

and different country by country. As of right now, the global box is right at $392m (Wonka).

And showing down, needs another $200 million just to get to $600 Million, the minimum in my opinion, just to break even, but it looks like to top out at around $500 Million.

Only $11.9m of that is in China where only about 55% goes back to the studio.Everywhere else is between 65-85%. So even at a blended 60% (outrageously conservative in this case because of the low China numbers) there is already a profit based on your cost numbers of $10m.

First my cost was more then 10m on Wonka, second your China numbers are way off, again, link at the bottom, but from the Hollywood Reporter-Under a trade agreement established in 2012, the U.S. studios are entitled to only 25 percent of box office sales revenue for their films opening in China.

It still seems to be doing well with nothing really coming out and has some box office tail left. That also doesn't incorporate the next windowing groups (PPV, streaming, etc.) where essentially all the revenue goes to the bottom line.

PPV numbers are dead right now, everyone has learned that movies will be on streaming services quite quickly after theatrical/PPV.

I know that you focus on Disney with your job, but the other studios are quite different in their approach (not saying that is good or bad, but you can't apply the same metrics to a moderately costed musical that you do to a high cost Marvel movie).

I really do not do too much with the theatrical side, mostly the TV/streaming side, that is how I posted certain rumors here about ESPN going to streaming a year before it was announced and how Disney/ESPN+ dropped out of bidding for Sunday Ticket, even knew about Dr.Who moving to D+, even posted that here months before it was announced officially.

But as much as I enjoy knowing all the secrets ( and I know a lot more, but still not able to post), I hate my job and I retire for a second time in May.

I don't see any possible scenario of bankruptcy unless the cable industry completely crumbles and all of the cash flow from the linear networks go completely away.

Right now they are following the GM path, keep running until they run out of cash, the rumor around the office is, they were trying to make it to 2024 and then sell to Comcast, but that looks like that is not happening, because they assume the Government will say no, the cost of buying it and really increasing their debt ( Comcast has been paying down debt also, was at 100 Billion, now about $94 Billion).

Does Hollywood Need to Rethink Its China Strategy?

As the Asian power's domestic film market mostly thrives, the disappointing box office for Warner Bros.' 'The Batman' and other recent releases suggests a continuing decline in audience enthusiasm for U.S. tentpoles: "China seems to have turned its back on Hollywood."

www.hollywoodreporter.com

Why Wonka Is Dominating the Holiday Box Office

The holiday box office is sweet for Wonka.

movieweb.com

 

[KAB]

Their nervousness is showing. I had the Ultimate Ad Free that I cancelled within the month I subbed for. Today I get an offer to get 6 mos. of Ad Free (not Ultimate, 4K) for six mos for $7.99. I went for it. No 4K (only I watch) is not that big of deal after Apple TV up scales it. A better deal than we could get from Dish). We kept it around for the new True Detective. Otherwise, we would be gone.

 

[Bruce]

The good news-

Streaming service Max ended 2023 profitable for the first time

The bad news-

Warner Bros. Discovery missed analyst estimates for both revenue and earnings as advertising revenue slumped.

Studio revenue dropped 17% in part as a result of strikes by Hollywood writers and actors.

Other points-

Warner Bros. Discovery paid down $1.2 billion of debt in the quarter and $5.4 billion in debt in 2023. It still has $44.2 billion of gross debt remaining.

Zaslav has dramatically cut content spending for the streaming service since merging WarnerMedia and Discovery in 2022

This I predicted a long time ago, using content from Discovery’s Cable Channels ( which is already paid for by per sub fees) to cover the fact they were cutting the more expensive HBO Type Content.

Studio revenue dropped 17% to $3.17 billion in the quarter. Adjusted EBITDA for the unit fell 29% to $543 million.

Warner Bros. Discovery reported a 14% decline in linear television advertising.

The company’s fourth-quarter net loss was $400 million, or 16 cents per share.

Warner Bros. Discovery shares drop 10% as company misses estimates, warns of 2024 cash flow headwinds

Warner Bros. Discovery boosted free cash flow but the company fell short of analyst estimates for revenue and profit.

www.cnbc.com

 

[NashGuy]

The good news-

Streaming service Max ended 2023 profitable for the first time

The bad news-

Warner Bros. Discovery missed analyst estimates for both revenue and earnings as advertising revenue slumped.

Studio revenue dropped 17% in part as a result of strikes by Hollywood writers and actors.

Other points-

Warner Bros. Discovery paid down $1.2 billion of debt in the quarter and $5.4 billion in debt in 2023. It still has $44.2 billion of gross debt remaining.

Yes, while it's true that WBD's Max is well ahead of Paramount+ and Peacock in having now achieved a slightly profitable year, it should also be noted that WBD counts HBO however it's distributed (including the bulk of its subs who come in via MVPDs) as part of their streaming figures. Here's analyst Rich Greenfield's brutal take:


View: https://twitter.com/RichLightShed/status/1761007029668229243

I continue to believe that the most rational path forward for the big three Hollywood studios/network owners -- Disney, NBCUniversal and WBD -- is to join together to work through Hulu as their direct competitor to Netflix by essentially making Hulu their DTC vehicle for the non-sports part of the core cable bundle. Meanwhile, they can package up the sports part of the bundle in the upcoming Hulu Sports DTC service.

HBO and Disney+ are quality products that can and will reach a large minority of US and international households but they're never going to be a something-for-everyone mainstream variety service that would be the first/only video subscription choice for most people. But that's exactly what Netflix is. Netflix is essentially a replacement for the basic cable bundle but without the expensive sports driving up the cost. If Hollywood wants to effectively compete with Netflix rather than eventually just become licensors to it, they need to band together, put their broadcast and basic cable content (linear channels plus on-demand libraries) into Hulu and price it effectively. Include 4K HDR, unlimited streams on the home network plus two simultaneous mobile device away-from-home streams as standard features. Sell it with ads for $15.99 and with ads removed from on-demand for $25.99. Offer ad-free Disney+ as a $9.99 add-on and ad-free HBO (with TCM included) as an $11.99 add-on, both with 4K HDR and the ability to use their separate standalone apps too.

Hulu is Hollywood's OG competitor to Netflix and I increasingly believe it's the only effective answer that they'll ever have to it.

 

[Don in CT]

Yes, while it's true that WBD's Max is well ahead of Paramount+ and Peacock in having now achieved a slightly profitable year, it should also be noted that WBD counts HBO however it's distributed (including the bulk of its subs who come in via MVPDs) as part of their streaming figures. Here's analyst Rich Greenfield's brutal take:


View: https://twitter.com/RichLightShed/status/1761007029668229243

I continue to believe that the most rational path forward for the big three Hollywood studios/network owners -- Disney, NBCUniversal and WBD -- is to join together to work through Hulu as their direct competitor to Netflix by essentially making Hulu their DTC vehicle for the non-sports part of the core cable bundle. Meanwhile, they can package up the sports part of the bundle in the upcoming Hulu Sports DTC service.

HBO and Disney+ are quality products that can and will reach a large minority of US and international households but they're never going to be a something-for-everyone mainstream variety service that would be the first/only video subscription choice for most people. But that's exactly what Netflix is. Netflix is essentially a replacement for the basic cable bundle but without the expensive sports driving up the cost. If Hollywood wants to effectively compete with Netflix rather than eventually just become licensors to it, they need to band together, put their broadcast and basic cable content (linear channels plus on-demand libraries) into Hulu and price it effectively. Include 4K HDR, unlimited streams on the home network plus two simultaneous mobile device away-from-home streams as standard features. Sell it with ads for $15.99 and with ads removed from on-demand for $25.99. Offer ad-free Disney+ as a $9.99 add-on and ad-free HBO (with TCM included) as an $11.99 add-on, both with 4K HDR and the ability to use their separate standalone apps too.

Hulu is Hollywood's OG competitor to Netflix and I increasingly believe it's the only effective answer that they'll ever have to it.

Or just have no ads and charge a flat rate for everything.