During his first earnings call as the CEO for Warner Discovery reporting on a full quarter directly under his watch (2Q 22), David Zaslav and his team announced a $3.42B loss, slightly worse than earlier projections, mostly related to costs related to combining the two companies. Per MSN, that figure included $2 billion spent on amortization of intangibles, $1 billion on restructuring, and $983 million on expenses from the transaction and integration.
Bluntly, Zaslav inherited a massive challenge with Warner Media, a company that, in his view, made blunder after blunder in its AT&T era. With his predecessor Jason Kilar, a founder of Hulu, fixated on the growth of streaming services, he committed talent and content to a parallel universe of HBO Max at a dizzying rate, greenlighting numerous projects and hiring a slew of executives that often found themselves competing internally for scripts and concepts. In 2021, theatrical movies shared opening windows with MAX, doubling down on a pandemic-infused strategy that short-term helped get HBO Max into millions of homes and, therefore, sampling of the wide array of original series that the sefvice offered. Established creatives like Christopher Nolan were mortified, but less entrenched producers and actors loved the drunken sailor spending approach and eagerly began to churn out project after project despite the uncertainty over the company.
Once Zaslav and company fully took over, they began to realize exactly how misguided this strategy was, particularly as 2022 unfolded and in case after case people began to show an appetite to return to theatres and massively support franchises and blockbusters truly worthy of a big screen experience, COVID be damned. And as a dispassionate non-Hollywood type faced with the necessity to make up those losses, based on their experience with Discovery, a company built on traditional networks, unscripted content and brand identity, Zaslav was arguably the worst possible decision-maker that creators could have been forced to adjust to.
Earlier in the week, it was leaked that BATGIRL, a DC Universe franchise extension that had been targeted for HBO Max and was in post-production, with $90M already committed to it, would never see the light of day. Reportedly, director’s cut testing was mediocre; while acclaim for lead Leslie Grace was strong, supporting characters were seen as either weak or misplaced. It simply didn’t live up to the standards set by the theatrically-released THE BATMAN from earlier in the year. It was deemed not likely to materially grow HBO Max subscribers, which even combined with Discovery + grew a modest 1.7M subs in 2Q22 and actually lost several hundred thousand in North America, and was not up to the level of “wow” needed to drag people out to a theater, With the deadline for a full tax writeoff looming this week, the Zaslav team took the sack.
Other previously announced projects, in various stages of incubation, were told they were not going forward. Freaked-out actors, crews and agents took to Twitter and other social media to try and drum up public sentiment for their anguish. Isn’t there ANY way their hard work could at least get the chance to be seen SOMEWHERE, particularly in a world they simplistically believe could and should accommodate an infinite amount of options.
Well, not always, children.
While nowhere near as empowered as Zaslav’s executives, nor with as much at stake, I’ve frequently been forced to tell creatives that their baby is ugly, often with a heavy heart. But as I sometimes would remind those who were open to hearing it, I’d remind them that they are much like the commercial artists who yearn to live better lives than residing in a cold water, paint-strewn flat–they have to recognize they are COMMERCIAL artists in a world where their expression needs to fit business standards, the price of having access to tens or hundreds of millions of people they otherwise would not have the chance to reach. Successful as they are, they don’t own theatre chains, they don’t own networks, and they certainly don’t own streaming services.
So Zaslav effective shot a hole in the heart of the emotional tweeters, coldly stating the facts regarding BATGIRL and defending his decision, while at the same time announcing a 10-year plan to grow the DC Universe, perhaps the strongest brand within the WDM world, to more fully compete with the MCU. There will be no OBI WAN KENOBE series here, not entering the game this far behind.
And as far as franchises go, let’s just say even rhe DCU is given a literal reality check under this regime. WDM put that universe side by side with that of 90 DAY FIANCE. Those shows, which fueled several of the Discovery networks and were often cable TV’s most-watched series with target demos, have 18 different iterations already in existence, and are clearly closer to Zaslav’s heart–and wallet–than the Warner IP.
So movies not good enough for theatres will be cancelled. Shows will be cancelled, Sadly, even more executives will become unemployed. And it will take time. There will indeed be a marriage of the HBO Max and Discovery+ services, but it will be (at least) a year away, after data and name options are explored. It will likely be heavily ad-supported. One could call it death by a thousand cuts, but there will be way more than just 1000 before all is said and done.
And don’t think these cuts will be limited to humans, Among the many non-endorsements Zaslav and company announced was the kids and family area, killing projects such as a new Scooby Doo movie and (inexplciably) an animated version of a schoolage Ellen DeGeneres. And while Looney Tunes at least is seen as worthy of inclusion on the same slide that argues to investors that a turnaround is imminent, given the highly volatile media world of the moment one suspects even they may be seen in a lesser light than, say, a TLC personality.
One can only imagine what Yosemite Zas might be thinking as he ponders his next move.
Maybe” “Oooooooooh, I HATE that rabbit!!!!!”
Until next time…