David Zaslav had a good Olympics. The CEO of Warner Bros. Discovery – home of HBO, CNN, Warner Bros. Pictures and the games broadcaster Eurosport – stayed at the Hotel de Crillon in Paris where he entertained Tom Cruise and Barbie director Greta Gerwig at the women’s gymnastics qualifiers, played tennis with John Travolta and hosted an afterhours party at the Louvre with Margot Robbie, Natalie Portman and Jennifer Hudson.
But he had to fly back early. On Wednesday August 9 he admitted to Wall Street at the company’s quarterly results that his television business, which accounts for Warner Bros. Discovery’s profits, are worth $9.1 billion less than previously thought, plus revenues were down over six per cent. Oh, whilst he had lost the rights to the NBA, America’s second most watched sport, to Amazon in July he was suing to try and get some rights back. “We’ll see,” he told analysts.
It was bad news, but Hollywood has been handing out bad news for a while. There’s usually a flurry of headlines then business as usual. This time, however, the grumbling has not gone away. Last week the ratings agency Standard & Poor downgraded its view of Warner Bros $41 billion in debt from “stable” to “negative” and there has been a flurry of outraged analysts’ notes since.
Why the long tail bad vibes? “The decline in the last quarter is not particularly worse than previous periods but the writedown and the future impact of losing NBA games has crystallised the decline in the eyes of the investors, hence the reaction,” explains Tom Harrington, analyst at Enders Analysis. “The core problem Zaslav has which, say, Disney doesn’t, is that the company doesn’t really have truly mass-market content, which is what you need for success in streaming – and you need to have success in streaming to balance the decline in linear.”
This may seem strange for the studio that released Barbie last year – the film that saved Hollywood from its post-strike blues and earned over $1bn at the box office. But then, this is also the company that produces Rings of Power for Amazon, a series with an average audience score of 38 per cent on review accumulator Rotten Tomatoes, as well as the rapidly cancelled sci-fi romance Time Travellers Wife, the shortlived Batman sequel Gotham Knights and the Blade Runner cartoon Black Lotus.
David Zaslav has been in charge of Warner Bros. Discovery since 2022 after he suggested an audacious merger with the most famous movie studio in Hollywood history whilst he was running the factual-based Discovery Channel. Harrington explains Zaslav thought he needed Warner because his content was not the kind that people would pay directly for, although they were happy to have it show up in their cable offering.
“HBO obviously doesn’t have that problem, but it makes super high-end programming that will always have a somewhat limited appeal,” he pointed out. “HBO Max/Max has a ceiling in subscriptions, Discovery adds almost nothing to its pricing power so what is there to balance or exceed the linear decline?”
Zaslav needs hits, in other words, and his current thinking is exploiting what he considers “underused IP” like Lord of the Rings, DC Comics and Harry Potter, with a new Potter TV series retelling the original seven books currently in the works and destined for the screen in 2025. Each season will cover one book, and the show will run for 10 years.
“I don’t know why he’s pursuing poor IP reboots,” one recently departed HBO employee said. “No-one needs a Harry Potter TV show. The story has been told twice and for the younger generation JK Rowling is a complicated brand.”
David Zaslav used to think Discovery’s blend of factual and sports programming was the best way forward back in 2020. When he launched Discovery+, he declared “scripted has had its moment, this is our time.” There were too many streaming services with scripted content, he explained. There would be a shakeout in the next two years with sports and “real life” entertainment attracting tens of millions of subscribers.
His first actions after the merger didn’t suggest he was immune to the glamour of scripts and stars. He moved to Hollywood from New York and took over Jack Warner’s historic office, hauling the old mogul’s desk out of storage. Even his home – the storied Woodland estate formerly belonging to playboy Godfather producer Robert Evans which Zaslav bought for $16 million – is a part of Hollywood history.
But whilst he has taken to hobnobbing with movie stars, he has alienated writers and directors by binning films for tax purposes (including the completed Acme Vs Coyote and the almost-finished Batgirl), cutting staff and taking a belligerent attitude to talent during the writers and actors strikes in 2023. Even after the deal was concluded, he said studios had overpaid to end the strike. It gained him a reputation as a Wall Street shill – cutting costs and quality to please investors.
With investors now turning against him, Zaslav appears to have given up on his dream of building an empire. Around the time he lost the rights to the NBA, the executive started discussions about breaking up the company – selling off the Warner Bros studio and the streamer, awkwardly rebranded from HBO Max to Max and soon to be renamed HBO again. This would leave the company’s debt with its dying TV networks – a move Bank of America called “potentially devastating.”
“None of the options facing Zaslav are great right now,” according to Ross Benes, a senior analyst at eMarketer. But it’s worth remembering Warner Bros has a long history of artistic and business creativity – from the first sound film The Jazz Singer through noir classics like Casablanca and the Maltese Falcon to New Hollywood triumphs such as Deliverance and Mean Streets and TV hits like Friends, ER and HBO’s Game of Thrones, Succession and The White Lotus. It also owns Superman, a character that should have been a goldmine but has been neglected and mismanaged in recent years; James Gunn’s reboot, due in 2025, is badly needed.
“Warner still has some of the greatest assets in Hollywood,” one recently departed HBO employee said. “But these are in people and talent. Zaslav should lean into those. At HBO the hit rate is way better than Netflix. The company still has a great reputation with talent – even more now that the other streamers are cutting those lucrative deals they signed with showrunners in the glory days of streaming.”
Alan Wolk, co-founder of TV analyst TVRev, agrees. “HBO still does a better job than anyone else of creating series aimed at an educated, more sophisticated audience that manage to generate a great deal of media buzz,” he argues. “On the other end, there are all the HGTV and Food Network shows which Warner owns the rights/IP to. It’s hard to tell whether a House Hunters episode is from 2016 or last week. They are eminently binegeable and translate easily to other countries. So that is a huge asset. CNN may have struggled over the past several years, but it is the only national news service available via subscription and it has a dedicated international following. That bodes well for its long-term survival.”
The question is, can Zaslav lead this? At the moment the calls for him to go are coming from sports fans, movie fans and the creative community. Wall Street isn’t calling for his head, but Moody’s Ratings senior vice president Neil Begley thinks he’s got a year to turn things around.
In the meantime, there’s all the great archive stuff Warner Bros has created which will be launching in the UK in 2025 when HBO’s current deal with Sky ends and Max launches here. Unfortunately, Zaslav has removed a lot of that archive to save on paying residuals to actors and writers. Still, he’ll always have Paris.
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