David Zaslav Talks Discovery-WarnerMedia Merger

In conversation with author and The New Yorker writer Ken Auletta at the Paley International Council Summit this morning, David Zaslav, the president and CEO of Discovery, Inc., discussed the pending WarnerMedia merger, the importance of scale and IP and finding success in the global streaming landscape.

Auletta queried Zaslav about employee dissatisfaction at WarnerMedia over AT&T’s management of the company. Zaslav responded by saying there is “frustration at all the media companies—a lack of clarity over where we’re going as an industry. What does all this disruption mean? How do I fit into that disruption? What’s the plan going forward? There is no right answer as to exactly how to come out of this. In the end, [if] you look at all media companies, there have been a lot of changes, a lot of restructuring, a lot of disruption. There’s a feeling at a lot of media companies that they don’t know if they’re going to make it. Are things going to change so much that my role won’t exist? I don’t see Warner as being any different. The opportunity here is the excitement of Discovery and all the assets we have around the world coming together with Warner Bros. There’s shared feeling that that menu of news, sports, we have a bigger library than Netflix, we have more global content than anybody else, together with Superman, Batman, HBO, we probably have the greatest menu of IP with the most diverse reach of any media company in the world. We have an extraordinary diverse menu of content, [which makes] us the greatest media company in the world. Therefore we’ve got to come together, when this deal is approved, and get to work, and if we do things right, we should be able to get HBO [Max], whatever it’s called, together with Discovery in over 200 million homes. In addition to that, we’ll have Warner Bros. Motion Pictures, so we’ll be able to do something that Netflix can’t. We’ll be able to open a motion picture everywhere in the world. And we’re only a content company. We’re only about storytelling. Almost every media company we’ll be competing with, they’re in other businesses. This is a pure content storytelling company. We hope to attract the best talent in the world. That’s who we are.”

On competing with Netflix, Zaslav noted, “Netflix is a great company. There’s a lot we could all learn from them. They disrupted this entire industry. Netflix seized the moment in a meaningful way. They are a global streaming service. They are a fantastic brand with a great product. And very good content. Warner Bros.-Discovery, one difference is, we can open a motion picture everywhere in the world. If you view Netflix and Warner Bros.-Discovery as creative content companies, one of the goals is, how do you attract the most compelling and talented people in the world? Most of the people in this business got into the business because they went to the theater, the lights went out, they looked up at the screen and something magical happened. Motion pictures is where you can affect the culture. The conversations I’m having, the best and the brightest talent want to still be on the big screen. At Warner Bros., we can do a deal where you open a movie everywhere in the world, and you can also do a great long-form scripted show on HBO. Warner Bros. is a maker. There are very few makers. A lot of the other media companies are mostly pickers. Disney is a maker, and they mostly hold onto that content for themselves. Warner Bros. is a maker that has chosen to sell a lot of that content to their competitors and broadcasters around the world. In a world that’s changing, the optionality of having maybe the largest producer of TV and motion picture content in the world, and then being able to make a decision over the next few years [about] how much you make for others, who else you make for. I’d much rather be in that position than on the other end saying, I hope I can still buy from those people.”

Auletta asked Zaslav about competing with the huge sums Netflix and Prime Video are shelling out to creatives. “I think together, Warner Bros. and Discovery are big enough and have enough content to be a full-on global player with Netflix and Disney and Amazon. My view is, a number of other players were not big enough as they stood. But they are all out there writing big, big checks to see how they do. There are a lot of players out there that are writing checks. That will get rationalized over the next couple of years. But when you choose where you’re going to go…HBO is at the top of its game. When people are talking about, what should I watch? At the tip of the tongue is the quality content that Casey [Bloys] is doing, and his ability to market it in a way and promote it that feels very big. If I was a creative and had a great story tell, I’d want to be on HBO. It’s very visible, particularly as we broaden it out globally. Yes, money matters, but it’s really about how do I be on a platform where I have the best chance of people seeing and relating to the content. It’s not going to be about the largest check, it’s going to be about an environment that is pro-talent, pro-writer, pro-creativity, and nurturing that environment.”

Asked about the structure of the combined company, Zaslav said it was too soon to talk about, but did say he is moving to Los Angeles, with an office on the studio lot “because that’s where the content is made. This is a content company; the better our content is, the better chance we have of being the leading media company in the world. In our plan, this company within three years is going to generate over $8 billion in free cash flow. We spend today $20 billion. How we modulate or grow that spend will be dependent on this mission of growing our direct-to-consumer product globally to over 200 million subscribers. When we close, HBO has predicted they’ll be in 72 million homes by the end of the year. We’re right now in 20 million homes. What do we need to do to be the leading streaming service in the world and create an environment that Warner Bros. Television and Warner Bros. Motion Pictures is a leading creative voice in their fields?”

Zaslav continued, “I believe in the vision. We’re the leader in international content. We’re the leader in sports. This sports, news, entertainment bouquet can establish this as a product that my grandchildren will be watching on every device—and they will be going to movie theaters.”