Business

How Warner Bros. Discovery post-merger can compete with Netflix and Disney as the streaming wars evolve

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The Warner Bros. film studio lot in Burbank, California.

  • WarnerMedia and Discovery have merged into Warner Bros. Discovery in a $43 billion deal.
  • The new company has the breadth and depth of content to compete with Netflix and Disney in streaming.
  • CEO David Zaslav, formerly chief of Discovery, is a highly regarded exec who faces challenges ahead.

Amid a wave of consolidation in Hollywood over the past five years, WarnerMedia and Discovery are the latest major media companies to merge, resulting in a behemoth of more than 40,000 staffers and a portfolio that now spans properties from iconic film studio Warner Bros. to premium cable network HBO to basic cable mainstays HGTV and Animal Planet. 

With the ink still drying on Dicovery’s $43 billion acquisition of the larger WarnerMedia, a new outline of the combined entity — now named Warner Bros. Discovery — is taking shape under the leadership of former Discovery CEO David Zaslav, following the exit of WarnerMedia chief Jason Kilar. 

Read Kilar’s full memo that he sent to employees as he departed the company

While his strategy is still forming, Zaslav said during a Discovery earnings call two months ahead of the deal close that “we want to compete against Disney and Netflix, but we are a very different company than the two of them,” adding that “we’re much broader than Disney, and we have much more identifiable IP.”

Read more about how CEO David Zaslav set priorities for the new Warner Bros. Discovery

Zaslav also said the companies’ combined spending on content would be “careful and judicious,” telling analysts and investors that “our goal is to compete with the leading streaming services, not to win the spending war.”

As streaming incumbent Netflix grapples with its first subscriber declines in a decade and a plummeting stock price, here’s how WBD is positioning itself to capitalize on its enormous range of assets — which include Harry Potter, Batman, and HBO hits such as “Succession.”

Layoffs in the C-suite and a streaming strategy reset

At the top of the WBD food chain, changes have been swift, with most of Kilar’s direct reports set to leave, including WarnerMedia studio and networks chief Ann Sarnoff, HBO Max general manager Andy Forssell, CFO Jennifer Biry, communications and inclusion head Christy Haubegger, among others.

Read more about the WarnerMedia senior leaders who will not stay on with the combined company

The exits — particularly those of Forssell and Haubegger — rattled staffers. Haubegger led a uniquely empowered equity and inclusion division, reporting directly to Kilar as opposed to HR, unlike the typical structure at many Hollywood companies. Forssell, a Kilar deputy who had worked with him at Hulu many years ago, was a well-regarded exec and architect of HBO Max whom many insiders had expected to stay on. 

Read more about insider fears after the first round of leadership layoffs: ‘Why get rid of someone who knows how the thing works?’

Zaslav made his first appearance in front of former WarnerMedia staffers with a visit to CNN in mid-April, treating staff to pasta and sushi lunch just two weeks after the launch of streaming news service CNN+. At the time, he said incoming CNN chief Chris Licht would make the call on the fledgling platform’s future strategy.

Read more about Warner Bros. Discovery CEO Zaslav’s visit to NYC, promising that a company hiring freeze would end ‘pretty quickly’

But not long after that, just three weeks after the launch of the paid subscription service, Warner Bros. Discovery abruptly shuttered CNN+. Licht said in a statement that CNN would be “strongest as part of WBD’s streaming strategy which envisions news as an important part of a compelling broader offering along with sports, entertainment, and nonfiction content.” 

Read more about the shutdown of CNN+, called ‘a combination of the wrong strategy and wrong capital allocation’ 

Many insiders faulted not Licht, however, but rather Kilar and recently ousted CNN chief Jeff Zucker, who had left the company in February after belatedly disclosing a relationship with a colleague. 

“This was all ego. All a power play for a bigger job or independence. Hubris. Nothing more,” one former WarnerMedia exec said of Zucker, with another insider calling it a “vanity project.” 

Read more about the rapid demise of CNN+ as insiders blame Jeff Zucker and Jason Kilar for the streamer’s downfall 

New leadership in streaming and continuity in content

As for Zaslav’s plans, the CEO gathered thousands of his employees on Warner Bros. historic studio lot in Burbank, California, where Oprah Winfrey (whose OWN cable network is in the Discovery portfolio) recounted to staffers that Zas had first approached then-WarnerMedia parent AT&T about a potential merger with Discovery in early 2021.

Read more about the Warner Bros. Discovery town hall where David Zaslav laid out his content strategy 

Longtime Zaslav deputy JB Perrette will now oversee all streaming strategy at the merged WBD, with HBO and HBO Max head Casey Bloys, TV studio chief Channing Dungey, and film studio head Toby Emmerich continuing on in their current positions. 

Read more about mystery man JB Perrette, who insiders say is a smart, low-key problem solver

Streaming services HBO Max and Discovery+ are set to combine into one massive platform, which streaming search engine Reelgood estimated would result in a content library of over 2,900 TV shows (greater than Netflix’s), and over 3,000 movies. 

Read more about what a combined HBO Max and Discovery+ would offer to viewers 

Questions remain about the DC brand, sports rights, and ‘a heavy lift’ to combine two global companies’ forces

Several questions remain, including the fate of DC, which has already seen personnel cuts in the wake of WarnerMedia’s previous AT&T parentage. 

“The Discovery merger is not scaring anyone on the comics side like the AT&T deal did,” said one comics-industry insider close to DC. “I think that one showed people how disposable they were, so the Discovery merger is just another day of being a cog in a machine.” 

Read about comic industry insiders’ hopes that the merger will bring stability to DC after heavy layoffs 

There’s also the looming fate of the unscripted teams on the former WarnerMedia side of the business. While Discovery offered limited scripted series, it is a behemoth in reality TV, known for penny-pinching and driving down costs. Insiders wonder how closely Zaslav will scrutinize the big budgets at HBO and HBO Max’s original programming, where an hour-long program’s production costs are said to easily run three times as high as Discovery’s.

Read more about industry insiders’ concern that there may be ‘intense pressure’ to trim unscripted budgets at HBO and HBO Max at Warner Bros. Discovery

No word yet, either, on how salaries might be impacted. Insider analyzed salary data at WarnerMedia and Discovery staffers, where recent wages ranged from $55 an hour to $300,00 a year. 

Read more about Warner Bros. Discovery salaries, analyzed via work-visa disclosures

And challenges no doubt face even a seasoned executive like Zaslav. Analysts point to debt, sports rights cost inflation, and a hefty load of linear cable networks, including Turner’s TBS, TNT, and TruTV, not to mention the uncertainty that hangs over the staff of a newly combined company, as more layoffs loom. 

“There are business planning rhythms that need to be harmonized; that’s everything from back-of-house systems like payroll, health benefits, compensation structures, vacation policies,” one media executive told Insider in late April. “All this mundane stuff can be a gargantuan distraction in addition to all of the front-of-house business planning. It’s going to be a heavy lift.”

Read about the 5 key challenges for David Zaslav as he merges WarnerMedia and Discovery 

Read the original article on Business Insider

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