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Technology Stocks : Warner Bros. Discovery
WBD 7.745+4.4%11:46 AM EDT

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From: Glenn Petersen5/19/2022 6:41:12 AM
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There’s a New Media Mogul Tearing Up Hollywood: ‘Zas Is Not Particularly Patient’

CEO David Zaslav has quickly put his stamp on Warner Bros. Discovery, weighing in on content, forcing out executives and cutting costly projects

By Joe Flint
Wall Street Journal
May 18, 2022 9:57 am ET



David Zaslav at Allen & Co.’s Sun Valley conference last year. KEVIN DIETSCH/GETTY IMAGES
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Days into his role as CEO of Warner Bros. Discovery, WBD -4.90%? David Zaslav gathered movie-studio executives and grilled them about a recent string of box-office flops, including “Cry Macho,” a Clint Eastwood neo-Western.

Warner Bros. executives conceded they had doubted the movie would turn a profit, people familiar with the meeting said. Why, Mr. Zaslav asked, was “Cry Macho” made if they had reservations? When they replied that Mr. Eastwood had given the studio many hits and never delivered a movie late or over budget, he answered: We don’t owe anyone any favors.

“It’s not show friends, it’s show business,” he told them, quoting from the 1996 Tom Cruise movie “Jerry Maguire.”

Mr. Zaslav, who last month took over the company resulting from Discovery’s merger with AT&T Inc.’s WarnerMedia, has given every indication he wants to be a talent-friendly mogul, schmoozing with industry personalities at the Beverly Hills Hotel.

But the 62-year-old cable-industry veteran, a protégé of the late Jack Welch, longtime CEO of General Electric Co., has shown he isn’t afraid to ruffle the industry’s elite.

He and his team have been scouring the company’s books, making it clear spending needs to be reined in. They have abandoned projects they consider costly and unnecessary. That included pulling the plug on CNN+, barely a month after previous management launched the streaming service, and canceling a DC Comics superhero movie in development.



Clint Eastwood, left, and Eduardo Minett in ‘Cry Macho.’ PHOTO: CLAIRE FOLGER/ASSOCIATED PRESS
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He has given an unwelcome jolt to executives in the WarnerMedia empire who were happy when AT&T decided to part with it in the merger, hoping there would be less financial scrutiny—not more. “It’s the first time they’ve had a leader there who is challenging them and asking the right questions,” said Ari Emanuel, CEO of Endeavor, which owns talent agency WME. “When there are things he wants, he goes after them in a very aggressive manner,” he said of Mr. Zaslav.

Mr. Zaslav, who starts working at 6 a.m. and holds meetings as early as 7 a.m., is looking to be more hands-on than his predecessors. Creative executives now report directly to him, a change that led to the ouster of many executives who once held these intermediary roles.

“Command and control” is a favorite phrase for Mr. Zaslav—Zas to friends and colleagues. “Zas is not particularly patient,” said Margaret Loesch, now retired, who ran Discovery Kids for him. “He is going to want to change things quickly.” His axing CNN+ was “pure Zas,” she said.

Mr. Zaslav has few options other than drastic moves. The deal brought the new company—now home of Warner Bros. and cable channels including HBO, CNN, TNT, Food Network and HGTV—$55 billion in debt, and he has promised to cut at least $3 billion in costs. He has given executives a few weeks to provide restructuring and business plans.

“We are not trying to win the direct-to-consumer spending war,” Mr. Zaslav said on an April earnings call. On the call, Chief Financial Officer Gunnar Wiedenfels called out the nearly $30 billion the company spends making and marketing content, saying: “We intend to drive the highest level of financial discipline here.”

The entertainment industry faces challenges as it pivots toward streaming, and rival Netflix Inc. has had recent stumbles. HBO Max, Warner Bros. Discovery’s primary streaming service that combines original HBO programming and library content from across the Warner Bros. properties, has shown strong growth, with 77 million subscribers around the globe, up 13 million from a year ago. The company has said it plans to combine HBO Max with another prominent streaming service, Discovery+.



Mr. Zaslav with mentor Jack Welch, right, in 2017. PHOTO: WARNER BROS. DISCOVERY
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Mr. Zaslav’s team is undoing some of the previous regime’s programming strategy, specifically plans to make original movies for HBO Max, people familiar with the matter said. The team scratched “The Wonder Twins,” a live-action film based on the Warner Bros.-owned DC Comics superhero duo, because Mr. Zaslav deemed its estimated $75 million-plus budget too high and its return too limited for a made-for-streaming movie, the people said.

Instead, Mr. Zaslav wants Warner Bros. to focus on increasing its number of theatrical releases to between 20 and 25 a year, a person familiar with his thinking said. Theatrical movies also tend to perform better on HBO Max than movies made exclusively for the service. Last year, Warner Bros. released 17 movies.

Current and former Warner Bros. executives said drawing people back into theaters remains difficult for movies that aren’t crowd-pleasers like “Batman” and “Spider-Man.”

At the same time, Mr. Zaslav is looking to make fresh “ Harry Potter”-related content for HBO Max—Warner Bros. made all the wizarding franchise’s movies—people familiar with his thinking said, and plans to meet with creator J.K. Rowling in the coming weeks to discuss the matter.

Mr. Zaslav also wants to re-examine children’s programming, another big investment area at Warner Bros, some of the people said. The new leaders aren’t sure children’s content is a good fit on HBO Max, where the ratings haven’t been strong, people familiar with their thinking said. Mr. Zaslav doesn’t want to abandon the business—Warner owns significant cartoon libraries, from Looney Tunes to Hanna-Barbera—but isn’t sold on the current strategy, they said.

Last week, the company pushed out Tom Ascheim, who oversaw children’s programming.

Executive exits

Just before Mr. Zaslav took over, WarnerMedia CEO Jason Kilar and Ann Sarnoff, the company’s head of studios and networks, departed. Also forced out was Brett Weitz, general manager of the TNT, TBS and TruTV cable channels. The company is expected to eliminate expensive scripted programming such as “Snowpiercer” from these channels in favor of cheaper reality shows—or “unscripted” fare—and more sports, people familiar with the company’s deliberations said.

This month, in another cost-saving move, Warner Bros. Discovery decided not to renew TNT and TBS’s deal to telecast the Screen Actors Guild Awards, a show it has carried for more than two decades.

Mr. Zaslav’s axing of CNN+ shocked CNN executives, who had spent $300 million launching it. The move signaled everything was under scrutiny.

“We will clearly take swift and decisive actions on certain items, as you saw on CNN+,” Mr. Zaslav said on the earnings call. Mr. Wiedenfels on the call said the company would take a similar approach with other “chunky investments” that are “lacking a solid financial foundation.”

When longtime Warner Bros. General Counsel John Rogovin left after a realignment diminished his role, it upset much of the Warner Bros. and HBO leadership, who saw him as critical to their teams, people familiar with the matter said.

Meanwhile, Mr. Zaslav has met with high-profile executives including former MGM movie chiefs Mike DeLuca and Pamela Abdy for potential roles at the Warner Bros. studio, people familiar with the matter said.



Mr. Zaslav’s axing of CNN+ shocked CNN executives, who had spent $300 million launching it. PHOTO: SPENCER PLATT/GETTY IMAGES
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Some longtime Warner Bros. executives expressed frustration that Mr. Zaslav wasn’t considering their views in strategy discussions and was flirting with potential replacements. His mentality, they said, can be summed up as: Can’t you crank out just hits?

Mr. Zaslav wants to use more statistics and research to determine what shows and movies the company should make, he said in a memo to employees on Monday. “As we build this new company,” he wrote, “we need to be guided by data and insights to understand what’s working and what’s not.”

Mr. Zaslav has tried to reassure the WarnerMedia rank-and-file that he appreciates their legacy. He recently met with CNN founder Ted Turner, posting a photo of the meeting on social media. At his first town-hall event on the Warner Bros. lot last month, he invited Cass Warner, granddaughter of Warner Bros. co-founder Harry Warner. He had the desk of Jack Warner, another co-founder, brought out of storage and into his office on the studio lot.

He has talked with past Warner Bros. leaders, including former TV chief Peter Roth and movie head Alan Horn, who is considering a potential consulting role, people familiar with the matter said. Mr. Horn said: “any such overture deserves respectful consideration, but no decision has been made.”

Financial discipline

Mr. Zaslav’s focus on financial discipline has been a career-long endeavor. After starting out as a lawyer, he joined NBC in 1989—then a GE unit—overseeing among other things distribution for its cable business. He counts Mr. Welch, GE’s CEO at the time, as a mentor.

Discovery hired Mr. Zaslav as CEO in 2006 when it was best known for educational programming. He immediately cut half the executive team, laid off 20% of the workforce and closed unprofitable operations such as Discovery’s ret?ail business. He moved Discovery toward unscripted programming, boosting ratings and profits but tarnishing the channel’s brands, some purists say. It became known for popular reality shows like “Here Comes Honey Boo Boo” and “19 Kids and Counting.” ?

?He expanded Discovery through acquisitions, spending nearly $12 billion to buy Scripps Networks and its cable channels including HGTV and Food Network in 2018. Worried that Discovery was still too small for the streaming era, he pounced when AT&T CEO John Stankey told him he was thinking of selling WarnerMedia.

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Mr. Zaslav, then CEO of Discovery, during the Discovery Upfront in 2018. PHOTO: MIKE COPPOLA/GETTY IMAGES?
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?Mr. Zaslav was establishing a Los Angeles base before the AT&T deal, buying the Beverly Hills home once owned by the late Paramount chief Robert Evans for $16 million in 2020. He is spending millions more on renovations and still hasn’t moved in.?

?He is known for his casual manner, favoring Diet Coke and fleece vests. He still hangs out with high-school buddies. His compensation is among the highest among CEOs, with a 2021 pay package valued at $246.6 million—much of it based on stock performance. He has several homes, and his end-of-summer star-filled soirees in East Hampton, N.Y., have become legendary. ?

?Under Mr. Zaslav, Discovery gained a reputation for bending reality-show producers to its will. While networks traditionally pay in advance for episodes, in 2019 Discovery told producers to cover production costs themselves and that it would reimburse them. ?

?The move, aimed at getting programming costs off Discovery’s books, was met with pushback from bigger producers with clout to say no. But most others are now making shows for Discovery under the new system. Such a hardball approach likely wouldn’t succeed in the highly competitive and expensive world of movies and scripted television. ?

?“There is a lot of bloat in budgets, but I don’t know if it is bloat you can cut out,” said John Ford, a former president of Discovery Channel and now a consultant. “Hollywood runs on that bloat.” ?

?

Austin? Butler as Elvis Presley in the Warner Bros. Pictures drama ‘Elvis.’ PHOTO: WARNER BROS. PICTURES
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Discovery is also known for using its networks to cross-promote programming—a contrast with Warner Bros. and HBO, which are known to splurge on marketing and talent relations. HBO sees its lavish parties as a cost of business; one “Game of Thrones” season premiere party topped $1 million, said people familiar with the event.

In a recent town-hall meeting, Kathleen Finch, whom Mr. Zaslav tapped to oversee the bulk of the cable networks, said the company was looking to approach Warner Bros. movie stars to see if they wanted to take part in a Discovery Channel Shark Week promotional event that involves swimming with sharks. She also said the Food Network could do shows about Elvis Presley’s favorite foods, which would help promote the much-anticipated summer release of “Elvis,” a Warner Bros. movie about the relationship between the singer and his manager, played by Tom Hanks.

‘Master communicator’

Mr. Zaslav cultivates close ties with top entertainment figures including Oprah Winfrey, whose cable network he bankrolled and in which Discovery owns a majority stake. He is close with director Steven Spielberg.



Mr. Zaslav has close ties with Oprah Winfrey, here on the Warner Bros. lot in April. PHOTO: WARNER BROS. DISCOVERY
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“He’s a master communicator when it comes to talent,” said Thom Beers, the producer of the long-running Discovery hit “Deadliest Catch.”

For nearly a year leading up to the Discovery and AT&T deal’s close, Mr. Zaslav held court at a Beverly Hills Hotel bungalow, meeting agents such as CAA’s Bryan Lourd and Endeavor’s Mr. Emanuel, according to people familiar with the meetings. He also talked with key Warner Bros. talent such as TV producer Greg Berlanti.

While those close to Mr. Zaslav described the past year as a listening tour to gain a better understanding of the business, Warner Bros. executives said the sessions were mostly an opportunity for agents and others to advance their own agendas.

Mr. Zaslav’s workaholic habits are already leading to changes on the lot. He arranged for the commissary and the Starbucks on the Warner Bros. lot to open earlier in the morning, people familiar with the matter said. His ultimate goal is for the Starbucks to operate 24 hours a day.

Write to Joe Flint at joe.flint@wsj.com

Corrections & Amplifications
Warner Bros. Discovery CEO David Zaslav’s end-of-summer soirees are in East Hampton, N.Y. An earlier version of this article incorrectly said the events were in Southampton, N.Y. (Corrected on May 18.)

Appeared in the May 19, 2022, print edition as 'Warner Bros. Discovery Chief Puts His Stamp on Hollywood'.

There’s a New Media Mogul Tearing Up Hollywood: ‘Zas Is Not Particularly Patient’ - WSJ
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