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Box office smash “Barbie” helped Warner Bros Discovery top core quarterly profit estimates but the effects of two Hollywood strikes and a weak advertising market could hamper earnings into next year, company executives said on Wednesday.

The dour outlook sent the company’s shares tumbling over 14%.

Although Hollywood’s film and television writers ratified a new three-year contract in September, ending their 148-day work stoppage, members of the SAG-AFTRA actors union have been on strike since July, roiling the industry’s 2024 film slate and depriving media companies of new content to sell.

Chief Financial Officer Gunnar Wiedenfels on a call with investors said there’s a “real risk” that the financial hit from the strike will linger into 2024.

“It is becoming increasingly clear now that much like 2023, 2024 will have its share of complexity, particularly as it relates to the possibility of continued sluggish advertising trends,” Wiedenfels said. “We don’t see when this is going to turn.”

Chief Executive David Zaslav said the company saw its lightest original content slate in years and had to delay some releases, leading to a drop in third-quarter streaming subscriber numbers.

Wiedenfels said that for full-year 2023 there will likely be a few hundred million dollars of a negative impact on EBITDA due to strike impacts, and several hundred million dollars of positive cash flow as a result of not being able to spend on production.

“The extreme success of the Barbie movie may be a one-off for them that won’t be repeated for at least a few years,” said Michael Schulman, chief investment officer at Running Point Capital.

The media company, forged by the union of WarnerMedia and Discovery, posted third-quarter adjusted core earnings of $2.97 billion, above estimates of $2.92 billion, according to LSEG data. Overall revenue of $9.98 billion was in line with estimates.

The company reported free cash flow of $2.06 billion, compared with $1.72 billion in the prior quarter. This surpassed expectations for $1.74 billion, according to Visible Alpha.

The company posted a net loss of $417 million, narrowing from a $2.3 billion net loss from a year-ago period.

“The market is not thrilled with the fact that even with the unparalleled blockbuster success of Barbie, they still found a way to lose $417 million in the quarter. Not ideal,” Great Hill Capital Chairman Thomas Hayes said.

Advertising revenue at its networks segment declined 12% to $1.71 billion as global conflicts and inflation created an uncertain climate for marketers.

The company’s streaming unit posted an adjusted core profit of $111 million, compared with a loss of $634 million a year ago. Global average revenue per user in the segment rose 6%.

Warner Bros Discovery had 95.1 million global direct-to-consumer customers at the end of the quarter, down from 95.8 million in the previous quarter.

In May, it launched its Max streaming service — combining HBO Max’s scripted entertainment with Discovery’s reality shows.

The company lost 17 cents per share, larger than estimates for a loss of 6 cents.

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Entertainment

Sean ‘Diddy’ Combs denied bail again ahead of sentencing

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Sean 'Diddy' Combs denied bail again ahead of sentencing

Sean “Diddy” Combs has been denied bail ahead of his sentencing on prostitution-related charges.

Judge Arun Subramanian said the hip-hop mogul had failed to show sufficient evidence he is not a flight risk and also cited admissions of previous violence made during his trial.

Combs, 55, has been in prison since his arrest in September last year.

During a two-month trial, jurors heard allegations that he had coerced former girlfriends, including singer and model Cassie Ventura, into having drug-fuelled sex marathons with male sex workers, while he watched and filmed them.

Sean "Diddy" Combs reacts after verdicts are read of the five counts against him, during Combs' sex trafficking trial in New York City, New
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Diddy fell to his knees after the verdict was delivered last month. Pic: Reuters/ Jane Rosenberg

In July, he was found guilty of two counts of transportation for prostitution – but cleared of more serious charges of racketeering conspiracy and sex-trafficking, which carried potential life sentences.

The rapper’s legal team hailed this a “victory” and immediately applied for bail ahead of sentencing, citing his acquittal on the top charges.

After this was denied, they submitted another application last week. Judge Subramanian has now rejected the request again.

In denying the motion for bail, the judge found Combs had failed to show sufficient evidence to counter arguments he is a flight risk, writing in a court filing: “Increasing the amount of the bond or devising additional conditions doesn’t change the calculus given the circumstances and heavy burden of proof that Combs bears.”

Read more:
How the trial unfolded
The rise and fall of Sean ‘Diddy’ Combs

U.S. District Judge Arun Subramanian gives legal instructions to the jury, during Sean "Diddy" Combs' sex trafficking trial in New York City
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Judge Arun Subramanian heard Diddy’s trial and will also sentence the rapper

He also found that an argument by the music star’s legal team that the squalor and danger of the Metropolitan Detention Center (MDC), where he is being held, did not warrant release.

“The public outcry concerning these conditions has come from all corners,” the judge wrote. “But as Combs acknowledges, MDC staff has been able to keep him safe and attend to his needs, even during an incident of threatened violence from an inmate.”

As well as Combs’s bail application, his legal team has also filed a motion calling for him to be acquitted or given a new trial on the prostitution-related charges only.

The judge has not yet responded to this application.

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How the Diddy trial unfolded

How long could Diddy be jailed for?

Combs is due to be sentenced on 3 October and could be sentenced to up to 20 years in prison.

Discussions on sentencing guidelines which followed the jury’s verdict suggest it is unlikely he will be jailed for this long, with an estimate of around two to five years, taking into account time already served.

However, it is ultimately up to Judge Arun Subramanian to decide the rapper’s punishment.

On Friday, Donald Trump was asked during an interview about a potential pardon for Combs following speculation about the issue.

The president said it was unlikely, adding that the rapper was “very hostile” during his presidential campaign.

Combs, who co-founded Bad Boy Records and launched the career of the late Notorious BIG, was for decades a huge figure in pop culture – a Grammy-winning hip-hop artist and business entrepreneur, who presided over an empire ranging from fashion to reality TV.

As well as the criminal conviction, he is also facing several civil lawsuits.

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BP raises prospect of more job losses as AI drives efficiency

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BP raises prospect of more job losses as AI drives efficiency

BP has signalled an accelerated effort to bring down costs ahead, refusing to rule out further job losses as artificial intelligence (AI) technology helps drive efficiencies.

The company, which revealed in January that it was to axe almost 8,000 workers and contractors globally as part of a cost-cutting plan, said alongside its second quarter results that it was to review its portfolio of businesses and examine its cost base again.

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BP is under pressure to grow profitability and investor value through a shareholder-driven refocus on oil and gas revenues.

Just 24 hours earlier, the company revealed progress through its largest oil and gas discovery, off Brazil’s east coast, this century.

BP said it was exploring the creation of production facilities at the site.

It has made nine other exploration discoveries this year.

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BP’s share price has lagged those of rivals for many years – a trend that investors have blamed on the now-abandoned shift to renewable energy that began under former boss Bernard Looney.

BP interim CEO Murray Auchincloss, takes part in a panel during the ADIPEC, Oil and Energy exhibition and conference in Abu Dhabi, United Arab Emirates, Monday Oct. 2, 2023. (AP Photo/Kamran Jebreili)
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BP boss Murray Auchincloss is facing shareholder pressure to grow profitability

His replacement, Murray Auchincloss, has reportedly come under shareholder pressure to slash costs further, with the Financial Times reporting on Monday that activist investor Elliott was leading that charge based on concerns over high contractor numbers.

Mr Auchincloss said on Tuesday that AI was playing a leading role in bolstering efficiency across the business.

In an interview with Sky’s US partner CNBC, he said: “We need to keep driving safely to be the very best in the sector we can be, and that’s why we’re focused on another review to try to drive us towards best in class… inside the sector, and technology plays a huge part in that.

“Just technology is moving so fast, we see tremendous opportunity in that space. So it’s good for all seasons to drive cost discipline and capital discipline into the business. And that’s what we’re focused on.”

When contacted by Sky News, a BP spokesperson suggested the company had no plans for further job losses this year and could not speculate beyond that ahead of the conclusions of the new cost review.

BP reported a second quarter underlying replacement cost profit of $2.4bn, down 14% on the same period last year but well ahead of analyst forecasts of $1.8bn. Much of the reduction was down to lower comparable oil and gas prices.

It moved to reward investors with a 4% dividend increase and maintained the pace of its share buyback programme at $750m for the quarter.

BP said it was making progress in driving shareholder value through both its operational return to oil and gas investment and cost reductions, which stood at $1.7bn over the six months.

Shares, up 3% over the year to date ahead of Tuesday’s open, were trading 2% higher in early dealing.

Derren Nathan, head of equity research at Hargreaves Lansdown, said of the company’s figures: “Production increases, strong results from trading activities, favourable tax rates, and better volumes and margins downstream all played their part.

“It’s also upping the ante when it comes to exploration and development, culminating in this week’s announcement of an oil find at the offshore Brazilian prospect Bumerangue.

“Its drilling rig intersected a staggering 500m of hydrocarbons. Taking into account the acreage of the block, it’s given BP the confidence to declare the largest discovery in 25 years.”

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Environment

Russia weighs into U.S.-India tariff spat, saying New Delhi can choose its own trade partners

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Russia weighs into U.S.-India tariff spat, saying New Delhi can choose its own trade partners

Russia’s President Vladimir Putin bids farewell to India’s Prime Minister Narendra Modi following their meeting at the Kremlin in Moscow, Russia July 9, 2024. 

Gavriil Grigorov | Via Reuters

Russia on Tuesday weighed into the growing spat between India and the U.S., with the Kremlin saying New Delhi is free to choose its own trading partners.

Washington and India’s leadership are at loggerheads over imports of Russian oil, with U.S. President Donald Trump threatening New Delhi with much steeper tariffs if it continues to purchase the commodity from Russia.

The Kremlin, an important trading partner of India’s and one which had stayed silent as the spat erupted in the last few days, commented that Trump’s tariff threats are “attempts to force countries to stop trade relations with Russia.”

“We do not consider such statements to be legitimate,” Kremlin Press Secretary Dmitry Peskov continued, speaking to reporters Tuesday.

“We believe that sovereign countries should have, and have the right to choose their own trade partners, partners in trade and economic cooperation. And to choose those trade and economic cooperation regimes that are in the interests of a particular country.”

The dispute between Trump and New Delhi is being closely watched by investors after Trump threatened on Monday that he would be “substantially raising” the tariffs on India, although he did not specify the level of the higher tariffs. The president had threatened a 25% duty on Indian exports, as well as an unspecified “penalty” last week.

He also accused India of buying discounted Russian oil and “selling it on the Open Market for big profits.”

India hit back at the U.S. later on Monday, accusing it and the European Union of hypocrisy.

“It is revealing that the very nations criticizing India are themselves indulging in trade with Russia. Unlike our case, such trade is not even a vital national compulsion [for them],” the foreign ministry said in a statement.

Western countries have used sanctions and import restrictions as a way to stifle Moscow’s oil export-generated revenues that fund its war machine against Ukraine. However, some of Russia’s trading partners, particularly India and China, have continued their purchases of discounted Russian crude that their economies largely rely on.

India and Russia’s trade relationship has grown since the invasion of Ukraine in 2022; Russia became India’s leading oil supplier after the war began, with imports increasing from just under 100,000 barrels per day before the invasion — 2.5% of total imports — to more than 1.8 million barrels per day in 2023 — 39% of overall imports, the U.S. Energy Information Administration said earlier this year.

— CNBC’s Lim Hui Jie contributed reporting to this story.

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