Following a $100 million, Multiversus-led hit to their financials, Warner Bros. Discovery has admitted that their video game division is “substantially underperforming”.
This concession regarding WBD’s struggling game efforts was jointly offered by CEO David Zaslav and CFO Gunnar Wiedenfels during the company’s November 7th Q3 2024 Earnings Call.
Making the call’s first comment on the subject while speaking to the performance of the company’s ‘Studio’ segment (which encompasses both their theatrical and video game divisions), Zaslav asserted that while “there have been some real bright spots in our Studios business”, in particular the success of Beetlejuice Beetlejuice, he would be remiss if he did not “acknowledge that our Studio’s business must deliver more consistency.”
“This applies to our Games business, which we recognize as substantially underperforming its potential right now,” he then specified. “We have four strong and profitable game franchises with loyal global fans: Hogwarts Legacy, Mortal Kombat, Game of Thrones and DC, in particular Batman, which are focusing our development efforts on those core franchises with prudent studios to improve our success ratio.”
Adding to his colleague’s comments, Wiedenfels would later note that, when it came to WBD’s Studio segment, “performance in the quarter was subpar relative to our internal expectations, notwithstanding the difficult comparisons with [the massive box office results of] Barbie last year.”
Turning to explain this dip in Studio profits, the CFO placed the blame mainly on the shoulders of their intra-company Super Smash Bros. clone Multiversus, whose free-to-play, microtransaction-heavy monetization model had apparently failed to generate any real revenue.
“Results were impacted by games for which we took another $100 million plus impairments due to the underperforming releases,” said Wiedenfels, “primarily MultiVersus this quarter, bringing total write-downs year-to-date to over $300 million in our games business, a key factor in this year’s Studio profit decline.”
Further expanding on the company’s future outlook during the Q&A portion of the call, Wiedenfels opined, “I think we’re through some of the worst and it hasn’t been pretty on the gaming business, but we have four games that are really powerful and have a real constituency that love them and we’re going to focus on those four primarily.”
“And we’re going to go away from trying to launch 10, 12, 15, 20 different games,” he additionally confirmed. “I think we have a real chance now, with focus, to have the gaming business be steadier. So, I’m very encouraged you know our ambition to get [Studio segment revenue] back to at least $3 billion and then start growing. And there’s a lot of building blocks that with wind at our back in order to get there.”
Likewise, when later asked by Morgan Stanley analyst Benjamin Swinburne if he could speak as to what actions the company was taking in service of building up their Studio segment, Zaslav detailed, “We have made investments on the tours and retail side franchises, an area that we still think is going to have significant opportunity. Games, to your point is definitely set to recover and content licensing as we just discussed a minute ago is certainly going to be higher from a 2024 starting base. So that’s why we have been so confident in our statement that we’re going to see $3 billion and then growth from there.”
“Now is that all going to materialize in 2025? We’ll see,” he said. “A lot of those decisions will still need to make and it’s going to depend on the individual business units. But I think we have a very sustainable long-term growth story ahead here for the Studio.”
While such a multi-million dollar loss would be reason to sweat for any business, WBD is likely feeling particular financial pressure thanks to the fact that, as reported by the company during their Q2 2024 earnings call, the absolute implosion of Suicide Squad: Kill the Justice League – which on its own lost $200 million – caused their video game revenue to decline by a staggering 41%.
And given that the only confirmed titles currently being worked on at WBD are Monotlith Productions’ Wonder Woman, which despite being announced in 2021 via a brief teaser trailer has still yet to receive any further trailers or marketing materials, and the now-confirmed-financial-sinkhole MultiVersus, one is left to wonder if the company’s video game business has any true hope of recovering prior to the eventual release of the yet-to-be-officially-announced Hogwarts Legacy sequel.
To this end, the fourth season of Multiversus – which will add both Teen Titans member Raven and resident Adventure Time vampire Marceline to the game’s playable roster – is currently set to kick off on November 12th.