Warner Bros. Discovery is about to enter a crucial week. The company, whose regime just crossed the 100-days-in-office mark, reports its Q2 earnings Thursday, when CEO David Zaslav and his team are expected to lay out more concrete plans for the combined entity than they did on the Q1 earnings call, held just a couple of weeks after the $43 billion Discovery-WarnerMedia merger had been completed. That could include more details about how the two companies’ streaming services, HBO Max and Discovery+, would be combined and under what name; about the company’s theatrical-streaming film strategy; and how a promised $3 billion in savings (a number many expect to go higher) would be achieved.
August has long been known to be the month for mass layoffs. With the first wave expected next week, it is likely that the honeymoon period of the new regime will soon end. This coming Monday also marks the start of WBD’s three-days-a-week return-to-office mandate, which became one of the first major tests for the new leadership; the return plan was met with strong resistance by WarnerMedia employees when it was announced soon after the merger was completed.
HBO Max, which has positioned itself as a top-tier streamer after two years of operation, has found itself at the center of all sorts of wild speculation for the past couple of months — from a supposed shutdown and folding into Discovery+ to a buying freeze and dramatic cull of its development slate.
The streamer has temporarily halted live-action children and family programming, but most of the rumors couldn’t be confirmed as HBO Max is gearing up for its biggest launch ever. Game of ThronesPrequel House of the Dragon. Further consolidation of HBO and HBO Max’s scripted operations under Casey Bloys is expected, and the future of HBO Max’s unscripted division is in question given the pending merger with the nonfiction-focused Discovery+.
WBD’s film strategy for HBO Max also is believed to be under scrutiny, with movies expected to get theatrical distribution before going on the streamer going forward. The possibility of a common name for the WBD streaming service that would include both the metropolitan appeal of HBO Max as well as the Middle America pull from Discovery+ is another topic under discussion. Zaslav was initially thought to be keen to change the streamer’s name, but he now seems more open to the possibility.
There have been a handful of layoffs so far — along with high-profile executive departures like Warner Bros. CEO Ann Sarnoff and Warner Bros. President of Global Kids, Young Adults and Classic Tom Ascheim — in the first three months since the Discovery-WarnerMedia merger was completed, but the majority of cuts are expected to start in August and wrap by Thanksgiving. As part of a restructuring, the company is expected to affect thousands of workers. “bigger mess”You may be surprised at what you find.
The last division reports on layoff targets are due Friday. This means that the trigger could be pulled any time. Rumours of a second batch in mid-August were recently confirmed by sources. However, there is talk that they could be coming next week. The second wave of layoffs is expected in September. The goal is to have the majority of the layoffs completed by the end of the summer.
In May 2021, the original deal was proposed. Since then, $3 billion has been frequently mentioned as the goal for how much expense can be trimmed from the new company. John Malone, the media billionaire who is an influential member of the new company’s board of directors, has indicated that $4B is a feasible target. Deadline is told by senior insiders that the target could rise to $5B. Jessica Reif Ehrlich from Bank of America called the $3B target “The Target” in a research note she sent to her clients in April. “highly achievable, if not conservative, given several areas of duplicative expenses (e.g., tech, ad/distribution sales force, real estate, etc.).”
WBD already has made cuts in its sales department, which Jon Steinlauf leads, with approximately 1,000 jobs (or 30%) being eliminated. While sales remains the primary target of the company’s cuts, marketing, distribution, and engineering are also being rumored as areas that will be most affected by the company’s efforts to eliminate redundancies. Although WarnerMedia employees have left the most, there are rumors that Discovery employees may be among the first to go after the merger.
According to reports, division leaders were not given a target headcount but instead told to give a strategic view of how they can improve their operations. Unlike the WarnerMedia cuts following the acquisition by AT&T, WBD has not implemented voluntary buyouts as a way of reducing workforce, and layoffs are expected to be largely performance-based.
“People are looking back a little wistfully at the AT&T era,”Deadline reported that a senior executive left the company earlier this year. “They were a phone company, but they understood that and they tended to mostly stay out of our business.”
A major restructuring at WarnerMedia was a defining moment of AT&T’s troubled stewardship of the company. The long-standing silos that existed between divisions were broken down and a large number of experienced execs left the company. There have been many challenges created by the merger of WarnerMedia and Discovery media companies. Each has its own cable TV portfolios, production operations, and streaming platform.
“I don’t think I’ve ever seen someone come in and look to just outright gut a company like this,”Deadline is told by a senior Warner veteran.
The pattern is known to all those who worked under Zaslav for 15 years as Discovery’s head. “The cuts were constant,”One veteran from those years spoke out. “And they were so stealthy – 20 here, 30 here, never a huge number that would attract attention or require a write-down. It became a running joke to come in on Monday and everyone would say, ‘Well, hey, my security badge still works!’”
Long-skeptical investors may be appeased by the upcoming cuts. WBD, as many media companies, faces economic headwinds. The financial environment is difficult, and this will likely reflect in the earnings. The stocks of Discovery and former WarnerMedia parent AT&T both lost significant ground during the 10 months when the deal was pending. WBD stock dropped 38% from April 11 when it first traded and closed Friday at just $15 per share. The stock market has been in difficult times lately. But, WBD’s decline is greater than the declines in Disney, Comcast, Paramount and Paramount over the same period.
Cuts in the content teams are likely to be some of the most visible when they occur.
The linear Turner Networks were the first major target and have already seen a slew of changes including the departure of Brett Weitz, general manager of TNT, TBS & truTV; SVP Original Programming Adrienne O’Riain; and unscripted chief Corie Henson. Nancy Daniels, Kathleen Finch and the combined networks group have produced many unscripted series like The Big DThe series was cancelled several weeks ahead of its premier and a variety of high-ticket development were canceled. Chad, SnowpiercerThe Orange Bear Must Be Killed
It’s believed that over time, a new programming strategy will be put in place that will include cheaper reality fare and potentially new scripted series.
On the unscripted front, there have been constant rumors that the company will make sizable cuts to HBO Max’s alternative team led by Jennifer O’Connell, who also runs live-action kinds/family programming, an area from which the streamer has already pulled back.
Unscripted is a major source of synergy given it is the area where there’s the most crossover between the WarnerMedia units and Discovery teams. From a purchasing perspective, HBO Max and Turner Networks are more expensive than Discovery. Take, for example, HBO Max reality series.FBoy IslandIt costs $1.5M to $2M per hour, while a Discovery hour is priced at $400,000 to $500,000
There’s been little noise around Mike Darnell’s unscripted production group, which suggests that the studios divisions — which include Warner Bros. Unscripted Television. Telepictures Productions and Warner Horizon Unscripted Television — may continue as is, helped by the fact that Discovery didn’t produce many of its own shows.
The high-profile scrapping of J.J. Abrams’ HBO series DemimondeLast month was a time when the question arose about how the merger will handle A-list talent.
The Lost co-creator In 2019, Bad Robot and his Bad Robot signed a huge five-year deal for television and film with the studio. This was in a highly competitive market. The WBD top executives have been scrutinizing Bad Robot’s output so far, and there’s a feeling the relationship may have been “mismanaged,”With the new company leadership eager to get some projects moving through this pact. This includes HBO Max shows that are in development, which are believed moving forward despite recent rumors.
HBO will likely continue business as usual with the possible addition of HBO Max. Zaslav is a well-known admirer and supporter of what HBO Max Chief Content Office Bloys has achieved. He signed a new five-year contract. Zaslav also was front and center at this week’s glitzy premiere of HBO’s House of the Dragon, which is expected to get one of the biggest ever — and possibly the biggest — marketing campaign for an HBO/HBO Max series.
Turner Networks expects sports to remain a major focus. They see Major League Baseball, Major League Basketball, March Madness college basketball, and the NBA as the key linchpins of their networks. WBD currently pays $1.2 million a year for NBA game coverage. That deal is up at the end of the 2024-25 season, adding another big decision to the new company’s growing list.
IP will continue to be a major differentiator in the future. Warner Bros. Discovery has the libraries of DC Comics, Harry Potter, Hanna Barbera and Looney Tunes, a collection matched only by Disney with Marvel, Lucasfilm’s Star Wars and Pixar.
It is important to properly manage big franchises. Finding a DC chief that can rejuvenate the comics universe like Kevin Feige has done with Marvel is of paramount importance. There’s been much chatter about new Harry Potter extensions, including a TV series, and Zaslav is understood to have recently met creator J.K. Rowling.
The film strategy will likely continue to be theatrical. Zaslav is not thought to be a big fan of direct-to-streaming movies, believing that the return on investment is low and it doesn’t help churn across HBO Max. Former Disney exec Alan Horn was brought in recently to help with feature strategy. He will work alongside Pamela Abdy (ex-MGM chief) and Michael De Luca (ex-Disney chief).
Zaslav relies on industry veterans to help him as he dives into areas where he doesn’t have any hands-on experience like scripted TV and movies. He reportedly sought the advice of a number former executives, including Peter Roth, who was the Warner Bros. Television Group’s chief executive for many years.
WBD’s first 100 days are over. We might get a glimpse into the company’s future when the 100th and 100th consecutive 100 days come to an end. On Thursday’s earnings call, WBD may give us a glimpse of that.