Yahoo Finance Studio Profit Report: A Year of Major Transition
It was another tumultuous year in Hollywood thanks to the dual labor strikes in 2023, the fallout on the film pipeline and the box office remaining below pre-COVID pandemic levels, among other factors.
The positive: The global box office jumped 31 percent to $33.9 billion, led by Barbenheimer. But TV studios’ financials were hit by pressure on these operations across the industry, including fallout from the dual labor disputes. What did all that mean for the studio divisions of Hollywood giants? Overall, only one studio unit among entertainment conglomerates posted profit growth for the calendar year 2023, per The Hollywood Reporter‘s calculations.
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Keep in mind that financial disclosures for these units remain limited and are not easily comparable. The names alone vary: Paramount reports figures for its Filmed Entertainment unit, Warner Bros. Discovery and Comcast post results for their Studios divisions, and Sony has its Pictures unit. The businesses included in them differ as well. For instance, Sony’s Pictures segment includes TV networks. And Sony and others include their TV studios in the division.
And not all studios operations use the same accounting methodology, which makes direct comparisons difficult.
The annual Studio Profit Report also includes an educative look at Disney, even though it doesn’t disclose figures for its film or studios operations per se. THR is instead looking at Disney’s “content sales/licensing and other” financials, which observers say provide the closest comparable. Also, the figures below are for the calendar years 2023 and 2022, even though Disney and Sony have fiscal years that don’t align with the calendar year, and their executive teams manage their businesses with an eye on the fiscal year.
With all those caveats in mind as the backdrop, here’s a closer look at the bottom line of the film business in a time of fast-paced change. (See also: The Streaming Profit Report.)
NBCUniversal
Profit: $1.3B +35% year-over-year
Revenue: $11.6B -6% year-over-year
Super! X-large! The puns for Universal’s celebration of a year, in which it went nuclear (!) on the box office were manifold.
The studio’s breakout year was led by the No. 2 film The Super Mario Bros. Movie with $1.36 billion in worldwide revenue in 2023, No. 3 Oppenheimer ($958 million) and No. 5 Fast X ($705 million). Those and the rest of its 24-movie slate drove the Donna Langley-led studio to $4.91 billion in global box office revenue in 2023, up 26 percent and allowing it to snatch the top spot from Disney, which had been the leader since 2016.
“Other revenue,” consisting of the sale of physical and digital home entertainment products, as well as the production and licensing of live stage plays and the distribution of content produced by third parties, climbed 1 percent to $1.3 billion. But one revenue category, content licensing, fell in 2023, to the tune of 12 percent, to $8.2 billion.
Universal cited “the timing of when content was made available by our television studios under licensing agreements, including the impact of the Writers Guild and SAG work stoppages in the current year, partially offset by the timing of when content was made available by our film studios.”
The studio unit’s bottom line was, however, helped by a more than 8 percent decline in expenses, led by a more than 9 percent drop in programming and production to just below $8 billion, helped by the strikes; a 7 percent decrease in marketing and promotion to below $1.6 billion; and a minimal decline in other costs to $818 million.
Comcast president Michael Cavanagh recently touted the studio’s strong talent relationships. “We are proud to work alongside our creative partners like Christopher Nolan, Chris Meledandri and Jason Blum, who are innovative industry leaders, to develop content that continues to delight audiences,” he said on the latest earnings conference call.
The unit could also celebrate that Oppenheimer’s best picture win at the Oscars and Universal’s topping the worldwide box office made the studio the first to achieve both those accolades in a single year.
Comcast management has also highlighted the studio segment as one of its six growth drivers, which also include Peacock, theme parks, as well as residential broadband, wireless and business services. Predicts Peter Supino, analyst at Wolfe Research: “The ‘Big 6’ growth businesses should exhibit solid revenue growth again in 2024 and beyond, more than offsetting legacy declines to produce 4 percent EBITDA growth in ’24.”
Warner Bros. Discovery
Profit: $2.2B -19% year-over-year
Revenue: $12.2B -12% year-over-year
It was think pink for Warner Bros. Discovery in 2023, even if its Studios unit saw its black ink shrink.
Warner’s Margot Robbie blockbuster Barbie led the box office in 2023 with $1.44 billion in worldwide revenue for the year, providing a big chunk of the studio’s $3.94 billion in total global theatrical revenue, up 61 percent from 2022.
The low-budget horror movie The Nun II was also a profitable success and Wonka found its audience, but DC blockbusters, such as Aquaman and the Lost Kingdom and The Flash, underperformed at the box office.
Hogwarts Legacy boosted the studio’s gaming revenue and profit for the year, while TV revenue was down, affecting the bottom line.
All in all, Studios unit revenue for the year dropped more than 10 percent, “primarily driven by lower TV revenues, which more than offset higher games revenue from the release of Hogwarts Legacy and higher theatrical revenue from the release of Barbie.” WBD explained that TV revenue was “adversely impacted by the WGA and SAG-AFTRA strikes and certain large licensing deals in the prior year,” as well as “fewer series sold to our owned platforms, and fewer CW series.”
Studios earnings took a nearly 20 percent hit, affected by the lower revenue and higher marketing expenses for a larger theatrical release slate, 13 movies compared to seven in 2022, and Hogwarts Legacy, “partially offset by lower TV content expense, commensurate with lower revenues.”
Still, WBD’s studios segment again brought in the biggest profit among Hollywood conglomerates, just like in 2022, 2021 and 2020.
A lack of 2024 guidance by WBD management spooked some on Wall Street, though. “Limited revenue disclosure across TV, film, and games products, theatrical, home entertainment, and licensing revenues, drives additional uncertainty in forecasting,” argued Morgan Stanley analyst Benjamin Swinburne in a recent report.
But Bank of America analyst Jessica Reif Ehrlich touted “several potential drivers that could improve the fundamentals of WBD’s business.” In terms on the studios segment, those include “a return of TV productions back toward pre-strike levels, increasing licensing of their deep valuable library, an improving film slate,” and “continued growth in the gaming business.”
The analyst team at MoffettNathanson forecasts studio unit revenue to edge up 1 percent in 2024 to nearly $12.3 billion, while operating expenses will only climb 0.3 percent. The experts therefore project 3.3 percent profit growth to nearly $2.3 billion in 2024, followed by further gains to $2.4 billion in 2025 and $2.5 billion in 2026.
Paramount Global
Profit: -$119M -144% year-over-year
Revenue: $3.0B -19% year-over-year
Blame Maverick! Paramount’s top theatrical performer of 2023 was Mission: Impossible — Dead Reckoning Part One, which brought in $567 million worldwide last year, about a quarter of the studio’s $2.09 billion worldwide box office haul in 2023. Management also touted five No. 1 debuts at the domestic box office. But added together, they couldn’t match the power of Top Gun: Maverick.
The studio released eight films in 2023, the lowest number of all Hollywood giants, but just as many as in 2022. Among them were also the likes of Transformers: Rise of the Beasts, PAW Patrol: The Mighty Movie, Scream VI, Dungeons & Dragons: Honor Among Thieves and Killers of the Flower Moon.
However, the company’s theatrical revenue of $813 million ended up 34 percent below 2022, while licensing and other revenue dropped 14 percent to $2.12 billion. Paramount’s overall filmed entertainment revenue fell 20 percent, which “primarily reflects lower theatrical and licensing revenues, driven by the success of Top Gun: Maverick in 2022,” the company said.
As a result of the revenue decline, as well as “incremental costs incurred during production shutdowns and lower revenues from studio rentals and production services,” the latter meaning the studio’s backlot business, Paramount’s filmed entertainment unit swung from a profit to a $119 million loss in 2023.
Management highlighted how much theatrical drives various other parts of Paramount’s business.
Turtles and PAW Patrol “had successful feature films,” Paramount CEO Bob Bakish said on the company’s third-quarter earnings conference call. “Films which also drove a broader ecosystem of consumption on linear, streaming and at retail. And we look forward to future extensions, including the release of a new Teenage Mutant Ninja Turtle series next year and a third PAW Patrol movie in 2026.”
Bakish noted on a recent earnings call, “As we move into 2024, we’re focused on producing content more efficiently and magnifying the impact of our slate. We’re improving return on investment (ROI) by lowering the average cost per title. This, by balancing high-budget tentpoles with more modest-cost titles, like Mean Girls and Bob Marley: One Love, improving the financial return on the overall slate.”
The analyst team at MoffettNathanson forecasts 5 percent revenue growth at Paramount’s Filmed Entertainment unit in 2024 to $3.1 billion, with its bottom line swinging back to a slight profit estimated at $20 million. For 2025 and 2026, the experts expect that to grow to $85 million and $100 million, respectively.
Sony Pictures
Profit: $719M -18% year-over-year
Revenue: $10.3B +2% year-over-year
Spider success wasn’t enough for Sony to catch a higher profit in the web of its Pictures unit, even though revenue recorded a slight upswing.
The studio’s biggest 2023 blockbuster was Spider-Man: Across the Spider-Verse, whose box office revenue reached $691 million to make it the studio’s highest-grossing animated film ever.
Other successes of the year included The Equalizer 3 and A Man Called Otto, while Gran Turismo and Napoleon underperformed expectations.
All in all, motion picture revenue fell 12 percent, including drops of 9 percent in theatrical, 31 percent in home entertainment, 6 percent in TV and more than 5 percent in streaming.
Sony’s TV Productions arm, though, managed to shine with a 15 percent revenue gain thanks to such hit shows as The Last of Us, Twisted Metal, the final season of The Crown and The Night Agent, and media networks revenue climbed 4 percent.
But despite the overall slight revenue gain, Sony’s Pictures unit posted a bottom line decline of 18 percent despite growth in three of the four quarters of calendar year 2023.
The culprit: a roughly 70 percent operating income drop in the second calendar year quarter due to such factors as “lower television and digital streaming service licensing revenues” after the year-ago period had “benefited from the contribution of several franchise films released theatrically in fiscal year 2021” and an “increase in marketing expenses in motion pictures in support of a greater number of theatrical releases.”
Management warned of the continuing impact of Hollywood strikes during its most recent earnings report and conference call. “Although the Hollywood strikes have finally ended, delays in script development have caused continued changes in movie release schedules and delays in the delivery of television shows,” Sony said, estimating the impact of the strikes on profits in the current fiscal year ending in March 2024 “to be a little less than 20 billion yen,” or $136 million. “Next fiscal year, in addition to continued delays in releases, it is expected that digital streaming licensing and other revenues will decline due to a decrease in the number of films released this fiscal year, so the negative impact on profits due to the strikes is expected to reach its peak and the amount of such impact on a U.S. dollar basis is expected to be slightly less than twice as much as in the current fiscal year.”
Disney
Profit: -$666M (the loss widened sharply from -$20M in 2022)
Revenue: $7.8B -8% year-over-year
The Mouse House is working on turning around its creative fortunes.
Disney had a slew of top 10 hits at the worldwide box office among its 17 releases of 2023, including Guardians of the Galaxy Vol. 3, the No. 4 with $846 million; No. 7, The Little Mermaid ($570 million); No. 9, Elemental ($496 million); and No. 10, Ant-Man and the Wasp: Quantumania ($476 million). It all added up to more than $4.8 billion, but that was down slightly from $4.9 billion in 2022 and meant the studio had to yield the worldwide box office crown to Universal.
Disney’s fiscal year ends in the fall, but THR crunched the numbers for calendar year 2023 to use figures for the same period as the company’s peers. That said, Disney’s financials aren’t directly comparable to other Hollywood giants. After all, since a reorganization for the streaming age a few years ago, it hasn’t reported results for a film or studios unit, instead posting financials for its “content sales/licensing and other” segment, which THR analyzed. Analysts see that as not comparable but as the closest equivalent to its former studio unit. The segment includes the sale of film and episodic television in TV/SVOD and home entertainment (some of which was previously reported as part of the giant’s media networks unit), distribution of films theatrically, licensing of music rights and its stage business.
Disney’s revenue for the 12 months of 2023 in this content segment dropped 8 percent, while its loss multiplied.
TV/SVOD distribution results were affected by lower sales volume of film and episodic TV content, which “included the impact of the shift from licensing our content to third parties to distributing it on our DTC streaming services,” the company said.
Plus, in its earnings reports last year, Disney repeatedly pointed to weaker theatrical performances than in 2022, including for The Haunted Mansion compared to Thor: Love and Thunder, or The Marvels and Wish compared to Black Panther: Wakanda Forever, Avatar: The Way of Water and Strange World in the prior-year period.
Disney CEO Bob Iger is focusing on “reinvigorating our creativity” and output. “Let’s not lose sight of the fact that in the last year, the studio had some real success, not to suggest that we didn’t have some films that were not successful, that we were really disappointed in,” Iger said on the latest earnings call. “Volume sometimes can be detrimental to quality. And in our zeal to greatly increase volume, partially tied to wanting to chase more global subs for our streaming platform, some of our studios lost a little focus. So the first step that we’ve taken is that we’ve reduced volume, we’ve reduced output, particularly at Marvel.”
Among the 2024 tentpole releases he touted were big brand names, such as Kingdom of the Planet of the Apes, Inside Out 2, Deadpool 3, Alien: Romulus and Mufasa: The Lion King.
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