The chief executive says he’s focused on long-term quality, but then the company’s stock dropped 14%
Warner Bros. Discovery CEO David Zaslav demonstrated on Thursday that he’s stuck on the horns of a dilemma that is the fate of a contemporary entertainment mogul: He wants to satisfy Wall Street and be beloved in Hollywood.
Can he be both?
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After an uninspiring first earnings report that missed Wall Street analysts’ expectations by nearly $2 billion and caused the stock to drop as much as 14% after market close, Zaslav explained that he’s focused on long-term quality rather than short-term gain.
“We think that we could build a long-term, much stronger growth business out of DC,” Zaslav said during the earnings call. “And as part of that, we’re going to focus on quality.”
This came a day after the studio killed a $90 million “Batgirl” movie at Zaslav’s behest, which the studio declared not good enough to be released.
“You look at Batman, Superman, Wonder Woman, Aquaman, these are brands that are known everywhere in the world,” said Zaslav to media analysts, referring to the DC universe of films. “And the ability to drive those all over the world with great story is a big opportunity for us. We have done a reset. We’ve restructured the business. We’re going to focus where there will be a team with a 10-year plan focusing just on DC.”
If only it were that simple.
Killing “Batgirl” infuriated Tinseltown’s actors and directors, but is a brilliant tax write-off for investors. Collapsing HBO Max and combining it with Discovery+ saves cash, yet layoffs sever the studio’s ability to discover the next hitmakers. And a decade-long plan Zaslav laid out to “elevate” the DC brand with surefire hits to earn the studio money only extends the uncertainty that has plagued the brand for the preceding decade.
Zaslav can be a hero to Wall Street and a villain to Hollywood or the reverse, with each faction on opposite sides of Zaslav’s pledge to cut $3 billion in expenses at the studio.
There was some irony in the fact that the combined HBO Max and Discovery+ now reach 92 million subscribers worldwide, but Zaslav also acknowledged that the streaming service will only break even when it adds another 40 million subscribers, likely in 2024 or 2025.
And Hollywood has been up in arms for two days over rumors of HBO Max going away.
“He’s tough on a tightrope,” said one Warner Bros. insider who works on the television side of the business.
Executives teased on Thursday’s earnings call that they would have more to share on the upcoming amalgamation between streamer HBO Max and HBO closer to its launch. But, they revealed it will utilize Discovery+’s technology backbone while aiming to incorporate many of HBO Max’s well received user features.
There was no talk of layoffs, or at least the specific amounts. But top Warner Discovery executives confirmed to TheWrap that even more layoffs will be coming, especially in unscripted, on the tech side, marketing and back office. And the reaction coming out of HBO’s offices in New York and Los Angeles were specific. “They are all freaking out,” said one top Hollywood agent.
The hope is to cut down on each individual service’s shortcomings, such as Max’s performance and customer issues and Discovery+’s limited consumer features. Cherry picking the attributes of both streamers and looking to improve on their weaknesses will ideally enable better content and more personalized choices.
Addressing the “Batgirl” decision, Zaslav said: We’re not going to release a film to make a quarter… the focus is gonna be how do we make each of these films, in general, as good as possible. But DC is something that we think we could make better and we’re focused on it now.”
The CEO called out Dwayne Johnson’s upcoming “Black Adam” as a DC film he’s excited about, with the “Shazam!” and “Aquaman” sequels also on tap. But Warner Bros. has struggled to keep up with Disney’s Marvel Cinematic Universe, soft-launching with 2013’s Superman reboot “Man of Steel” before filmmaker Zack Snyder steered an interconnected DC Cinematic Universe that struggled to coalesce for critics and audiences.
A Marvel-level of quality is clearly the goal for Zaslav on the blockbuster movie side of things. He recently hired Disney veteran Alan Horn to help create a roadmap that will mirror Marvel’s success. “It’s very similar to the structure that Alan Horn and Bob Iger put together very effectively with Kevin Feige at Disney,” Zaslav said.
But the new focus follows years and years of similar pivots and un-pivots, strategies and then reversals of those strategies. It must be dizzying to be at Warner Bros. Discovery. For Zaslav, it’s all brand new.
Joe Bel Bruno
Joe Bel Bruno is TheWrap's Editor at Large, Business. He most recently served as the Founding Editor of the business news site dot.LA. He was previously the Managing Editor of Variety, and served as Deputy Business Editor and later Deputy Entertainment Editor at the Los Angeles Times. Bel Bruno also ran markets coverage for The Wall Street Journal. Before that, he was an award-winning reporter at the Associated Press in New York, and held senior posts in London and New York for Knight Ridder Financial.