Warner Bros. Posts Flat Q3 Operating Income Due to Higher TV Production Costs

Warner Bros. Oct. 24 reported third-quarter (ended Sept. 30) operating income of $576 million, which was essentially comparable to operating income of $578 million during the previous-year period. Revenue increased 7.5% to more than $3.7 billion from $3.4 last year.

The results represent the first under new corporate umbrella WarnerMedia, which includes Warner, HBO and Turner, and was formed following AT&T’s $85 billion acquisition of Time Warner.

The studio, which includes Warner Bros. Home Entertainment, generated nearly $1.7 billion in revenue from theatrical product, flat with last year. TV content revenue increased more than 20% to nearly $1.6 billion from $1.3 billion. Warner generated another $435 million from video games – down nearly 5% from $455 million last year.

Television revenue increased primarily due to higher licensing of series and initial telecast revenue. Theatrical revenue remained essentially flat as the prior-year quarter included a more favorable mix of theatrical and home entertainment releases, including Annabelle: CreationDunkirk, It and Wonder Woman, partially offset by higher television licensing revenue of theatrical product and the theatrical releases Crazy Rich Asians, The Meg and The Nun in the current-year period.

Indeed, Wonder Woman, which was the fourth-highest selling packaged media release in 2017, has generated another $11 million in disc sales in 2018, according to The Numbers.com. Dunkirk, which generated $21 million combined DVD/Blu-ray Disc unit revenue last year, has sold $9 million worth of discs this year. Horror film Ithas sold nearly $35 million worth of discs.

Warner third-quarter operating expenses were $3.1 billion, up 9.1% versus the third quarter of 2017 primarily due to increased television production costs related to the higher number and mix of produced series. Operating income growth was essentially flat as growth in revenues was offset by higher costs, primarily related to increased television production costs.

TV broadcast productions in the quarter included “God Friended Me”(S1, CBS), “Lethal Weapon”(S3, FOX), “Manifest”(S1, NBC), “Murphy Brown”(S1/revival, CBS), “The Voice”(15th cycle, NBC), “Young Sheldon”(S2, CBS), “All American”(S1, The CW), “The Flash”(S5, The CW), “Riverdale”(S3, The CW), and “Splitting Up Together”(S2, ABC).

TV productions for pay-TV and over-the-top video include: “Castle Rock”(S1, Hulu), “You”(S1, Lifetime), “The Chilling Adventures of Sabrina”(S1, Netflix), “Titans”(S1, DC Universe), and “The Kominsky Method”(S1, Netflix).

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