Warner Bros. Discovery is Hollywood’s newest media giant, yet challenges loom
Two weeks after AT& T announced it was re-writing off WarnerMedia to the much smaller Discovery, executives flocked to the Warner Bros. lot within Burbank for a glimpse of the future — and the man who would lead them now there.
Discovery Chief Executive David Zaslav , the architect of their company’s audacious $45-billion takeover of WarnerMedia , sought during a Tuesday town hall meeting to reassure battle-weary troops that — unlike their present parent, AT& T — Discovery is all about creating programming that audiences crave.
The hard-charging 61-year-old executive stressed his respect for the Turner networks, including CNN, as well as HBO and the Warner Bros. movie and TV studio, that has churned out cultural touchstones for nearly a century.
“We’re not coming in here thinking that we know all the answers, ” Zaslav told the audience of about 75 film plus TV executives admitted to the studio’s Steven J. Ross Theater, according to a person who seem to saw a video stream, which was watched by hundreds of various other WarnerMedia workers around the nation. “There’s a ton we do not know, ” Zaslav added, “and there’s certainly a whole bunch that you know that we don’t know. ”
Zaslav’s information was well received but additionally underscored the myriad problems he will face if government bodies approve Discovery’s effort to buy a company that is more than two times its size.
New York-based Discovery, which usually owns such popular cable channels as Food Network, HGTV, Animal Planet plus OWN, is scrambling to adapt as consumers ditch cable TV for streaming systems. Discovery derives most of its revenue from cable TV channels. Even after the merger, an estimated 80% of Warner Bros. Discovery’s pre-tax earnings in 2024 will still be tied to the legacy cable channels, analysis firm MoffettNathanson said within a note.
Plus Discovery must sit on the sidelines in a fast-changing mass media environment as the merger moves through the government’s review, which could take more than a year. Breakthrough discovery has said it hopes to accomplish the takeover in mid-2022, but for now the companies can continue to operate as separate entities.
The regulatory delay will give competition Netflix, Amazon, Disney, Comcast and ViacomCBS more time to get traction for their streaming providers, which could leave WarnerMedia’s HBO Max and Discovery+ at a disadvantage.
“Both of these companies are at crucial junctures in building their [streaming] items, and now they are going to be focused on other things, ” Cowen & Co. media analyst Doug Creutz said. “David [Zaslav] would state, ‘Hey, we can walk plus chew gum at the same time’ and, on the Discovery side, they probably can — but it’s a different matter on the AT& T part. Are they going to be able to turns out HBO Max and get it to the level of success they desire when everyone is so diverted? ”
Creutz noted that after Rupert Murdoch announced he was selling much of his amusement company, 21st Century Fox, in order to Disney, the existing Fox businesses suffered as executives pondered about their place in the brand new regime and the merger slogged through nearly a year associated with regulatory reviews. During the temporary, Fox’s “film business fundamentally collapsed, ” Creutz mentioned.
An additional key challenge, according to analysts, is trying to figure out how to place their respective streaming solutions — including an anticipated offering from CNN — to attract millions of clients in the U. S. and abroad.
“The major challenge I realize is going to be having a comprehensive offering — bringing together a platform that’s going to be competitive within streaming, and I don’t understand that they necessarily have a lot of time to do that, ” Tuna Amobi, an analyst with CFRA Research, said. “To be successful in this race, you need a very credible global strategy. ”
Since AT& T absorbed Time Warner for $85 billion within June 2018, there have been multiple management shake-ups, more than two, 000 layoffs and debatable moves that have tested the particular faith of Hollywood. AT& T pulled the plug on the beloved classic movie streaming web site FilmStruck after which bet the company on HBO Max, a streaming support that got off to some rocky start a year back due to a high price point ($14. 99 a month) and also a shortage of original development. Morale plunged. This week, WarnerMedia introduced an HBO Max version with advertising and also a lower price point ($9. 99 a month) in an attempt to appeal subscribers.
The company also has been grappling with the fallout from its much-maligned decision to release all of Warner Bros. ’ 2021 films on HBO Max the same day they arrive in theaters, which infuriated powerful companies and directors.
Should regulators say yes to the deal, Zaslav will become the company’s fourth CEO in under five years. WarnerMedia’s current chief executive, Jason Kilar, who all joined the company just 13 months ago, is likely to depart after the merger is certainly complete.
When the two companies come together, additionally, it will be burdened with an approximated $58 billion in debt. The bulk of that debt will come from your $43 billion payment that will go to AT& T as part of the deal. (AT& T shareholders, at launch, will have 71% of the shares of the new stand-alone company).
Zaslav has said that he views $3 billion in cost benefits by 2024, which typically means more job profits / losses, causing more anxiety for a workforce that has endured considerable layoffs under AT& T.
“It’s have got to be tough to work presently there right now, ” Creutz said.
Analysts also expect some inevitable social clashes between two very different companies. Discovery is a huge in unscripted television, while the strength of Warner Bros. and HBO has long been giving premium scripted TV shows and movies.
With regards to the cost of producing Warner Bros. movies and HBO shows, there might be some sticker surprise, media veterans said.
“David is a content guy — but he’s not really a Hollywood guy, ” Creutz said. “A lot of Discovery’s success has been running unscripted TV production very effectively. Scripted content is, naturally, less efficient and more costly. It’s not, “Hey we need one more show about buying and selling homes, let’s flip the cookie-cutter out. ’”
Zaslav — that wore a business blazer and khakis — made a good impression during the Tuesday occasion, according to those in presence.
He talked at length about his bio: his Brooklyn roots, the moment he noticed he had no desire to be a corporate attorney at a big-city firm, his segue in order to NBC and helping to start CNBC, and building Discovery into a global company considering that becoming its CEO fourteen years ago.
“Warner Bros. has produced the best content over the last 98 many years, ” Zaslav told the crowd, according to the person who watched the town hall on movie. Warner Bros., with its well-known logo, “is imprinted in every of us, ” Zaslav additional.
One senior executive who attended the meeting said: “People respected the fact that he flew across the country to state ‘hi. ’ Everyone felt better that he respected a brief history and legacy of Warner Bros. and the importance of top quality content. ”
Still, there were some head-scratchers. When Zaslav outlined the HBO shows he admired, most were produced more than a decade ago, including “The Pacific” (2010), “Band associated with Brothers” (2001), “Entourage” (2004) and “Sex and the City” (1998). He did provide a shout-out to HBO’s present hit, starring Kate Winslet, “Mare of Easttown. ” (And “The Pacific” replayed on HBO over the holiday weekend. )
Zaslav’s quick-draw decision in order to announce the new corporate name, Warner Bros. Discovery, and a temporary logo may also have misfired. Views were mixed on the proposed name plus logo. Several saw it as a classy move to put the Warner Bros. name very first and bring back the “Bros. ” part of the moniker, another nod to the studio’s roots. At least it was less clunky than WarnerMedia, some reasoned.
Several people described the proposed logo as a little corny, comparing the yellow, blocky font to the title cards from vintage “Superman” movies and even the 1980s Steven Spielberg TV anthology collection “Amazing Stories. ”
After the conference, and amid ridicule upon social media, Discovery executives anxious the logo is initial.