David Zaslav Says Swift Moves Like CNN+ May Continue, but Theatrical Releases Will Be Central to WB

“At Discovery we had almost always $3 million in free-cash flow,” new Warner Bros. Discovery CEO David Zaslav touted about his 15-year tenure before becoming the head of the new combined company. “Now at WarnerMedia, they had $40 billion in content spend and almost no free-cash flow.”

That comment from the Q&A portion of the April 26 Warner Bros Discovery Q1 investor call sums up much about a presentation that should assure shareholders fiscally responsible, cost-minded leaders at the helm while inducing a fair amount of nerves among staff across the portfolio. It’s certainly a not-so-subtle dig at Jason Kilar and former WarnerMedia leadership. And it gives a big-picture take on why CNN+ was shuttered so quickly, though Zaslav and CFO Gunnar Wiedenfels mentioned the now-deceased streamer on multiple occasions during the call.

The bottom line is this: “We will not overspend to drive subscriber growth,” Zaslav said.

A global, streamlined, diversified, cost-conscience company is what Zaslav and Wiedenfels said they’re seeking, one that monetizes its IP but doesn’t necessarily tout its investment in content creation — or creators. Zaslav mentioning “90 Day Fiancé” as a show that could be recommended for viewers to watch after they finish “Euphoria” is based in the data, he said. But it’s hard not to think that may cause a little concern among the creators who’ve worked with HBO because it’s the premier brand for premium content. “Because of the breadth of the quality menu of IP we have,” the new company’s direct-to-consumer offering will be strong, Zaslav said, doubling down with an example that viewers going from “The Gilded Age” and “Julia” to “The Big Bang Theory” and “Friends” is what success looks like on HBO Max.

Not that HBO Max will be around that much longer in its current format: Wiedenfels reiterated that a combined streamer with Discovery+, “an integrated product,” is “the priority for our team.” Managing subscriber churn will be key, Zaslav then said. “We believe this will be a combustible product. The sooner we can get it launched… but we want to get it right.” That means no push to launch in new markets or chase subscriber growth until the new product is available.

Zaslav spoke at length about how Warner Bros. Discovery is unique in owning most of its IP outright and the content creation arms to manufacture stories from that IP. “We own the factories,” he said, touting that as an efficiency as opposed to paying an outside production arm. “We have a deep history of world-class production: Warner Bros. Film, Warner Bros. TV, and HBO. Those that control their IP, rather than just write checks, are best.”

For distribution, though, there’s one major way of getting their content seen that Warner Bros. Discovery doesn’t own, though: movie theaters. And Zaslav touted not just the success of “The Batman” at the box office but the halo effect of having it in theaters caused for raising awareness of the film, making it an event that audiences then wanted to see on HBO Max as well. Gone for good is the idea of a streaming-first approach for Warner Bros.’ biggest motion-picture properties.

“Should we collapse the entire motion picture business on streaming?” Zaslav asked. “I said, ‘No.’ But now the data is showing ‘No Way.’” Once again, that’s implicit criticism of the previous management.

Which does make one wonder what other changes might be afoot. Zaslav suggested some content on HBO Max hasn’t been surfaced properly enough to be monetized. Wiedenfels said he was raising ROI hurdles, and that “2022 looks messier than I had hoped.” Earlier he had said, “The CNN+ decision last week was Exhibit A of the good news.” The company’s leadership won’t “be religious” about any future such decisions, with Zaslav saying, “We will take swift, decisive action on certain items, as you saw last week with CNN+.”

One area where change is taking place is sales: news, sports, and entertainment will all be presented as a unified offering to advertisers, starting with the May 18 upfront. And more aggressive cross-promotion among brands seems to be in the offing, perhaps to better maximize, or lower, the $5 billion the company currently spends on marketing.

Some of the company’s current strength comes from revenue streams U.S. observers might not think about: ad revenue from Winter Olympics coverage in Europe where Discovery has broadcasters boosted Q1 considerably. Certain niche Warner Bros. Discovery brands U.S. observers might care about strongly, such as Turner Classic Movies, went unmentioned, with Zaslav instead touting the company’s ownership of half the MGM library.

But after the CNN+ shuttering and the installation of Chris Licht as new CNN head, Zaslav did seem keen to praise the CNN brand: “The ability to provide journalism and facts are the foundation of a civilized society,” he closed his comments during the Q&A. “Advocacy networks [FoxNews, MSNBC] are a great business, but CNN is in the business of journalism first. And it’s a really good business. Because we own it. Sports is rented. What Ted Turner tried to create is really meaningful. Ultimately when there are war trials, Exhibits A, B, C, and D [from Ukraine] will be from the great work CNN has done.”

That still may not be the morale boost CNN staffers are looking for. But at a moment of profound uncertainty and change across the entire Warner Bros. Discovery portfolio, that praise may be the most anyone could ask for right now.

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