Warner Bros. Discovery, Inc. (WBD) Q3 2023 Earnings Call Transcript
Warner Bros. Discovery, Inc.
seekingalpha.com
Here's some quick recaps from the earnings call:
Looking across our full portfolio, another area where we see particular opportunity is in gaming where we have 11 world class studios and are unique amongst our media peers as both a developer and publisher of games. Research has shown that Gen Z and Gen Alpha prefer gaming to any other form of entertainment, more than social media, more than watching television or listening to music, more than going to the movie theater. Games will be even more important to our fans in the future, and so having this asset in our arsenal is a critical differentiator and a real growth opportunity.
As a developer and publisher, we control quality and enjoy the full economic benefits of the games we produce as well as capturing the broader franchise benefits across the company. In 2023 we've released two of the industry's top 10 console games, including the number one game released this year, Hogwarts Legacy and we still have the Switch version to come, launching next week. Our Harry Potter fans have immersed themselves in Hogwarts legacy, playing more than 700 million hours to date. That engagement helps not only our games business, but also helps build and revitalize the entire Harry Potter franchise and we know our fans want even more.
We've worked really hard on our games business for the last year and a half. And it's also a business where we have had a strong track record. Games have been a very successful and steady segment for Warner Bros. for over a decade. We've been profitable in each of the last 15 years averaging more than $400 million in EBITDA the last three years alone. We believe games is a critical and very valuable asset for the company with a great deal of potential for growth. Games has consistently enjoyed among the highest ROIs of any of our businesses. And while we're smaller than some of the leading pureplay gaming companies, our operating margins are comparable to the best of the public companies. We're clearly punching above our weight and we're just getting started.
And similar to the leaders in the industry, we've led with multiple key franchises, each of which is $1 billion gaming property. Harry Potter, Game of Thrones, DC, which is mainly Batman today, and Mortal Kombat, whose most recent release, Mortal Kombat 1 has sold nearly 3 million copies since its launch in mid-September. So we've got the proven IP and franchises, the world class studios and publishing talent and we intend to continue to invest more capital and more resources into the business.
Our focus is on transforming our biggest franchises from largely console and PC based with three-four year release schedules to include more always on gameplay through live services, multiplatform and free-to-play extensions with the goal to have more players spending more time on more platforms. Ultimately we want to drive engagement and monetization of longer cycles and at higher levels. We have put specific capabilities. We are currently under scale and see significant opportunity to generate greater post purchase revenue.
Bottom line, we've come a long way in 19 months and have built a very solid foundation for growth. I'm energized by what we've done in such a short period of time and even more so than where we are headed as a company. As I said at the outset, our industry is undergoing great disruption and while there are some key factors that are out of our control, like the economy and the impacts of the strike, we do have a very strong handle on those areas of our businesses that we can directly influence.
But starting with the games business, we've spent a lot of time over the past year going into a lot of granular detail across all of the areas of our capital allocation. And the games business has shown tremendous success, not only from a P&L perspective, really, as David said, contributing hundreds of millions of dollars to our consolidated profits, but also from a return on investment perspective. I've double and triple checked some of the metrics here because it's such a great investment opportunity. I'm stunned that we haven't been investing more into this opportunity under JB's and David Haddad's leadership here, and I think we have to do more. There's a lot more opportunity there and we're going to start tackling that.
Overall, the wizard game was a big success, same with MK1 selling 3 million copies. But, it sounds like they're going to lean more into games as a service and monetization. So for those who were hoping for more Batman: Arkham style DC games, I think we're out of luck lol.
