Warner Bros. Discovery streaming strategy in focus for Q2 earnings

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Leslie Grace attends Warner Bros. Premiere of “The Suicide Squad” at The Landmark Westwood on August 02, 2021 in Los Angeles, California.

Axelle/bauer-griffin | Filmmagic | Getty Images

Investors are looking to Warner Bros. Discovery for details on its streaming strategy when the newly merged company reports second-quarter earnings after the bell Thursday.

They already got a big hint earlier this week.

The company on Tuesday announced it would shelve its straight-to-streaming DC film “Batgirl,” surprising fans and offering a glimpse into the new no-nonsense era under recently installed CEO David Zaslav.

Zaslav took the helm in April and has prioritized cost-cutting measures and sought to refocus the company’s content strategy. Unlike former WarnerMedia CEO Jason Kilar, Zaslav wants the company’s high-budget films to debut in theaters, not on its streaming service.

The decision also raised questions about the future of other HBO Max film and television projects, with many subscribers taking to social media worried that their favorite programs could be next on the chopping block.

While “Batgirl” had a more modest budget than its theatrical counterparts — around $90 million after Covid protocols hiked costs — Warner Bros. Discovery, a newly minted merger between Warner Media and Discovery, has been combing its books for places to save money. Shelving the “Batgirl” film allows the company to take a tax-write off as part of a wider effort to pare down overall company debt.

The film completed production in March and was in the early stages of editing by the directing duo of Adil El Arbi and Bilall Fallah (“Bad Boys for Life,” “Ms Marvel”), but it won’t be released on the company’s streaming service, premier in theaters or be sold to another studio if the company opts for the tax write-down.

Burying the film also saves Warner Bros. Discovery potential marketing costs and any back-end payouts in original film contracts that may have pre-dated the merger.

Big name actors are often compensated after a film’s release based on box office markers or viewership metrics. And “Batgirl” had some big names attached: Michael Keaton reprised his role as Batman, J.K. Simmons was cast as Commissioner Jim Gordon and Brendan Fraser was tapped to portray the villain Firefly.

“Although the stated explanation for the scrapping of ‘Batgirl’ concerns the changing strategies with regards to feature films being released directly to streaming platforms, this still seems to be a remarkable decision given how far along the production was,” said Robert Thompson, a professor at Syracuse University and a pop culture expert. “Like burning down your house just before you pay off the mortgage.”

The decision seems to pass “at least some judgement” on the quality of the film as well, Thompson said, since Warner Bros. Discovery sees no future for it in either streaming or theatrical release.

Still, with “Batgirl” in such early stages of post-production, further editing could have addressed issues with the film in time for its scheduled debut in late 2022.

While shelving the movie may make some financial decision, it comes at a social cost. Not only were fans of DC comics disappointed, but many questioned why the company had axed a project helmed by an Afro-Latinx star, Leslie Grace.

Warner Bros. Discovery was already under fire for not openly addressing ongoing allegations against “The Flash” star Ezra Miller.

While executives have remained mum on Miller, they’re expected to address the controversial decision during the company’s earnings call Thursday — alongside broader questions around its content and streaming plans.

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