Skydance Flags $200M Warner Bros Headwind, Ousts DC Chiefs

Skydance expects a $200 million hit to adjusted EBITDA in the fourth quarter from the underperforming Warner Bros film slate, co-CEO David Ellison said Monday during the company's Q3 earnings call, five weeks after the merger closed.

Ellison did not soften the diagnosis. "The 2026 Paramount film slate is expected to generate $500 million more in lifetime profits than last year's. We've now taken on another company with mixed results across the business," he said at the call's onset.

He added: "We do have some headwinds particularly in studios where Warner Bros film has underperformed this year and will weigh on Q4 results. We'll apply the same playbook we did at Paramount: greenlighting more selectively, prioritizing profitable streaming growth over subscriber count, optimizing linear and driving efficiency through the cost structure."

"We've proven it works, and we're confident it will work again," Ellison said, pointing to $6 billion in targeted synergies from the merger.

How big are the Warner Bros losses?

The $200 million Q4 headwind is essentially one film: Digger, the Tom Cruise-starring political satire that cost $160 million before global prints and advertising and grossed $50.3 million worldwide just before the merger closed.

A report that Warner Bros' 2026 slate would lose $800 million for the full year is false, per sources. Even with the expected blockbuster success of Legendary's upcoming Dune: Part Three, the WB slate is estimated to lose around $400 million.

CFO Dennis Cinelli quantified the damage. "For the full year, Warner Bros is on track with our underwriting plan, with the exception of the near-term film slate," he said. Paramount remains on track for 2026 guidance at the high end of $3.9 billion adjusted EBITDA.

"While the Paramount film slate continues to perform well, that will be more than offset by the continued underperformance of the Warner Bros film slate," Cinelli said.

Monday's earnings excluded consolidated Warner Bros figures because the merger closed in Q4.

What is the box office picture?

Warner Bros has not released a single film grossing more than $100 million domestic this year. Misfires include Supergirl, The Bride and Digger. From January 1 to November 9, the Burbank lot counted $569 million at the domestic box office, down 70% versus the same frame in 2025 — still slightly ahead of Paramount's $537 million, up 15%.

Combined, the two studios hold $1.1 billion domestic year to date, trailing Universal ($1.9 billion), Disney ($1.6 billion) and Sony ($1.4 billion). Paramount's high points were Scream 7 ($121.9 million domestic) and Scary Movie ($108.2 million).

Who now runs DC Studios?

In a further signal to Wall Street, Skydance announced the departures of DC Studios heads James Gunn and Peter Safran. Early-2000s Marvel executive Jeremy Latcham, who left the Disney-owned studio in 2017 before the release of Black Panther, Avengers: Infinity War and Avengers: Endgame, will replace them.

Not all was grim on the Warner side. Ellison praised New Line's 2027 Christmas title Lord of the Rings: The Hunt for Gollum, calling it "a compelling theatrical offering."

Co-CEO Ynon Kreiz struck a measured note on the acquisition. "The Warner Bros. Discovery team did a good job managing their business and delivered the expected result through the close, with the one area of softness in the movie studio, and we are looking to build on their good work," he said.

Ellison also highlighted the upside: "We have approximately $40 billion [in film] franchises which I think highly strengthen the overall portfolio," with "a new movie arriving on our service every other week."

The test comes in 2026, when the selectively greenlit slate must close a $400 million gap.