The merger of WarnerMedia and Discovery that resulted in Warner Bros. Discovery (WBD 1.11%) has caused a shake-up for HBO Max. The company's CEO is currently on a mission to pay down a massive debt, with changes in streaming strategy and content cancellations making headlines almost daily.

For Warner Bros. Discovery's next move, it needs to ditch or overhaul its DC film franchise. 

An unsuccessful venture

WarnerMedia was aiming to compete with Disney (DIS -0.83%) in 2013 when it released its DC film Man of Steel. The movie came after Disney had acquired Marvel and its superhero franchise had grown to seven films. WarnerMedia subsequently started developing its DC extended universe (DCEU), which now includes 11 movies, with more on the way. However, the company has suffered substantial losses on its superhero venture, with Warner Bros. Discovery now responsible for paying it down. 

On April 8, Warner Bros. Discovery assumed $43 billion of debt from WarnerMedia following the merger with Discovery. CEO David Zaslav has made multiple moves to stop the bleeding, shifting HBO Max's content strategy to focus on titles guaranteed to generate profits. On Aug. 2, Zaslav made the controversial move to cancel the nearly completed film Batgirl, which had been due to release at the end of 2022. The company spent roughly $90 million on the movie that will see no streaming or theatrical release, with Zaslav reasoning the future of DC will "focus on quality."

Batgirl is not the first time a DC film has resulted in a hefty loss. Wonder Woman 1984 (WW84) debuted in December 2020, grossing $169.6 million worldwide on a budget of $200 million. While COVID-19 severely stunted profits, its box office returns were meager by pandemic standards. The Warner Bros. Pictures film Tenet came out three months earlier on Sept. 3, 2020, and grossed $365 million without familiar characters to attract audiences. Then three months after WW84, in March, Warner Bros. Pictures' Godzilla vs. Kong grossed $470 million worldwide. Underwhelming reviews and a tarnished DCEU reputation led WW84 to lose over $30 million.

While not an exact comparison to WW84, Marvel released Spider-Man: No Way Home in December 2021 at the height of the omicron variant and it went on to make $1.9 billion worldwide. Additionally, Marvel has four films in the top 10 highest-grossing movies of all time, while DC's closest film is 2018's Aquaman, which holds the 25th spot.

Prioritizing success 

Warner Bros. Discovery has spent almost a decade developing the DCEU to compete with Marvel to little avail. However, parts of the brand are worth salvaging. While the company's 2013 reboot of the franchise offered family-friendly movies in the vein of Marvel, DC's latest offerings have had success by taking a grittier, more mature route. Adult-focused movies have allowed DC to differentiate itself from Disney, adding a new facet to the superhero genre.

The company released its first recent DC film outside the DCEU in October 2019 with Joker. The R-rated movie grossed $1.07 billion at the box office and earned 11 Oscar nominations, winning two. March of this year saw the release of The Batman, which was a similarly mature take on DC and not set in the DCEU. It took home $770.8 million worldwide.

Audiences are still willing to come out in droves for DC films but have lost faith in the extended universe. This is most apparent with 2016's Suicide Squad and its 2021 soft reboot, The Suicide Squad. The first film grossed $746.8 million at the box office despite a Rotten Tomatoes critic score of 26%. However, 2021's film brought on Marvel legend James Gunn to direct, raised the rating to R, and earned a Rotten Tomatoes score of 90%, but only made $168.7 million on a budget of $185 million. The second film could not overcome the tarnished reputation of the DCEU after years of lackluster films. 

What's next?

The success of DC's mature films separate from the DCEU proves the brand is still an asset to Warner Bros. Discovery. However, with considerable debt, the company must cut its losses and prioritize content guaranteed to increase profits.

Zaslav has said about its DC strategy, "We have done a reset." It is a good sign that the executive is aware of DC's issues; however, the company still has an extensive slate of DCEU films on the way, as well as sequels to 2019's Joker and 2022's The Batman. Investors will want to keep tabs on the box office results of October's Black Adam and December's Shazam! sequel, both part of the DCEU, to know whether the franchise can be redeemed or if its reputation is too damaged to salvage. If the latter turns out to be the case, the company needs to prioritize mature DC content to succeed.