- Warner Bros. Discovery formed in 2022, combining a rich array of properties from HBO to CNN.
- The mega-merger faces challenges including huge debt and rising content costs amid economic headwinds.
- CEO David Zaslav has slashed content and staff. Read about how his strategy’s working and what’s ahead.
David Zaslav has been enjoying a stock runup after Wall Street analysts expressed increased optimism about Warner Bros. Discovery, with much cost-cutting behind it and growth ahead as it plans to launch a new streaming service.
AT&T’s WarnerMedia merged with Discovery in 2022 in a $43 billion deal, creating a content behemoth combining Warner’s HBO, CNN, and famed Warner Bros. film studio with Discovery’s lifestyle and reality fare.
The promise was to create a media powerhouse with a new streaming giant that could compete with Netflix and Disney.
But the threat of a recession, inflation, a declining ad market, and toughening streaming market have made CEO Zaslav and his team’s job of merging the companies — and slashing WBD’s debt load of about $50 billion — significantly harder.
As the company looks to wring $3 billion-plus in synergies from its units, management has axed creative projects and headcount.
Zaslav is facing strategy headaches at CNN, the task of launching a new streamer, and growing competition for top sports rights — all the while batting away rumors of a sale to Comcast and a stock price that’s fallen more than 50% since the deal closed, before a jump in January.
Here’s everything to know to get caught up on the merger, challenges ahead, and how Zaslav plans to tackle them.
New leadership to tackle integration challenges and synergies
Zaslav quickly assembled a team of Discovery vets who’ve been together for decades to help him integrate and lead the new company. As part of the merger, top WarnerMedia leaders left, starting with WarnerMedia CEO Jason Kilar and including most of his deputies like WarnerMedia Studios and Networks Group CEO Ann Sarnoff and HBO Max General Manager Andy Forssell.
The new team set out to evaluate every property in search of cost savings and ways to juice ad revenue and viewership across the organization.
Layoffs and culture clashes as 40,000 employees combine
Once the deal closed, Zaslav and his team faced the gargantuan task of integrating two companies with 40,000 employees globally. Waves of layoffs followed as he and his management team sought to find a promised $3 billion in “synergies,” a figure they later increased to $3.5 billion.
One of Zaslav’s earliest and most dramatic moves was to shutter CNN’s streaming service, CNN+, just weeks after it launched, eliminating hundreds of jobs. Buyouts and layoffs on ad sales teams followed.
A new content strategy that could tarnish crown jewel HBO
WBD also looked for savings and revenue by shifting its content strategy ahead of combining HBO Max and Discovery+ into a mega streaming service to launch this spring. The hope is that the new streamer will reduce churn, cut costs, and grow subscriptions by maximizing the content and features of both brands.
It’s a tricky job that must be executed without disrupting the user experience. There are also questions about how to brand the new service and get consumers to pay more; HBO Max is already at the high end of the streaming market, now at $16 a month for the ad-free version.
WBD shocked entertainment insiders by canceling high-profile projects like “Batgirl” and yanking episodes of shows including “Sesame Street” from HBO Max, and it has made other moves that concerned Hollywood creatives. Changes to WBD’s crown jewel, HBO, and its programming have been seen by some stakeholders as a threat to the brand’s prestige.
Rebuilding CNN after hundreds of staff cuts
2022 was a year of sweeping layoffs and organizational changes at CNN. Zaslav surprised onlookers in picking Chris Licht, who was a longtime acquaintance but who had never run a news enterprise of CNN’s size, and tasking him to overhaul the network.
Following in the footsteps of the popular Jeff Zucker, Licht has had a tough start. He’s made a series of cost-cutting moves, including hundreds of layoffs. He’s also made sweeping programming changes and tried to position the network as less partisan, leading to some head-scratching and confusion about what the strategy is.
DC Comics, box office battle, and sports rights
Zaslav has sought to improve relations with Hollywood and theater owners, but the cancellation of big projects, while delighting Wall Street, has sowed distrust among the creative set. He’s found new leadership for DC Comics — James Gunn and Peter Safran — ending a long search, but the unit faces roadblocks, with many different parties in the mix, each with their own vision.
WBD wants to remain a big player in sports, so Zaslav will be battling rivals for ever-costlier sports rights, starting with the NBA. To succeed, he’ll also have to balance investing in WBD’s streaming business without hurting the linear TV business.