In recent weeks, the CEO of Warner Bros. Discovery’s David Zaslav is starting to feel like a villain on a Real Housewives show. He is not here to make friends. He is here to make money. Movies have been canceled, TV shows have been pulled from HBO Max without warning, executives have been let go, worsening the company’s already glaring diversity problem, and the company has lost $20 billion dollars of its market cap, all in an effort to reach $3. billion in savings and hope to redirect a ship Zaslav has not agreed with the course of.
Zaslav’s plan is to focus on making as much money as cheaply as possible. When he joined Discovery in 2006, it was a small collection of education-oriented cable channels. Zaslav turned him into the reality TV monster we know today. It has made money for an audience that doesn’t pay for streaming, but instead flips the channel on their TV and, when they can’t find anything to watch, packs up and heads to the movie theater.
So while what we’re seeing could be the lies of an egotist who doesn’t understand the properties he’s bought, what seems far more likely is that Zaslav doesn’t care about the things that many of us care about, like “a massive spread of readily available content that speaks to smaller groups often underrepresented in popular media, all at a fairly affordable price.” Zaslav is not here to better enrich our entertainment landscape, he is here to make money.
Zaslav’s plan is to focus on making as much money as cheaply as possible
That means a company that has spent two years focusing its energies elsewhere has to change. In the years before the merger of Warner Bros. and Discovery, Warner Bros. underwent a rather radical transformation. COVID disrupted the way people operated in 2020 (and much of 2021 and even 2022), and Warner Bros. decided to focus on streaming at the expense of its other businesses.
As someone with a very nice home theater setup and a love for quick and easy access to content, this was very appealing to me, and I’m sure it was to you too. Instead of risking illness to see the biggest movies in theaters, we could sit at home and watch King Kong Mothra body over Mexico or Paul Atreides whisper his way to legend in Dune. As people’s concerns about COVID subsided (although it’s still very much a pandemic, and you should get tested regularly and mask up indoors!), HBO Max kept a steady stream of content designed to not compete with traditional rivals Warner Bros. like Disney and Universal. but with Netflix, whose movies go straight to the streamer and only make pit stops at theaters to qualify for awards.
Theater owners, already devastated by COVID, were furious with Warner Bros.’ new plan. They’re much happier now that Zaslav has reversed course, expanding release windows and even moving some films straight to theaters. (Though a marketing budget crunch means we’ll be seeing fewer Warner Bros. movies hit theaters in the coming years… it’s the thought that counts.)
“Why,” I’m sure Zaslav is saying to himself, “should we throw away all that potential money just to increase the $15 a month subscriptions we sell for HBO Max?”
And Zaslav’s appeal to theaters is mutually beneficial. Direct streaming makes a lot of sense for Netflix, a company with a very small distribution arm. Warner Bros. Discovery has an entire apparatus built to make a lot of money from movies in theaters. “Why,” I’m sure Zaslav is saying to himself, “should we throw away all that potential money just to increase the $15 a month subscriptions we sell for HBO Max?” Instead, the company can put the movies in theaters and then move them to the streaming service and bend to us, the consumers.
I personally am not a fan! I don’t want to pay a billion times for the same content. But I’ve been doing it for a long time with books, software, movies and TV. Zaslav knows there are plenty of rubes out there like me, probably willing to pay.
We don’t know how the shocking cancellation of Batgirl factors into Zaslav’s grand plan to reverse streaming courses and turn Warner Bros. Discovery in a much more traditional entertainment giant. Reports on the film have ranged from “it’s so bad it should never see the light of day” to “it wasn’t bad and had a really great message.” It might have been canceled because it looked a little too CW to appear after the Warner Bros. logo. Discovery on the big screen. Or it could have been canceled to help get a few extra dollars of tax relief while Zaslav & Co. is working to achieve the $3 billion in savings promised by the merger.
The decision to cancel Batgirl for tax reasons was strange
When I spoke with Francine McKenna, professor of accounting at The Wharton School and author of The Dig newsletter, she noted that the decision to cancel Batgirl for tax reasons was strange. “There are tax advantages to writing down assets now if you’re the type of company that likes losses because they offset current or future tax liabilities,” he said by email. “WB is a loser to begin with, so I’m not sure why incremental losses based on trash finished movies are so helpful.”
In its second quarter filings, Warner Bros. Discovery didn’t specifically reference the cancellation, but it did describe its general plan in very accounting terms:
Content impairments for the three and six months ended June 30, 2022 of $496 million and $501 million, respectively, and content development write-offs of $329 million for the three and six months ended June 30, 2022 were due to the abandonment of certain content. categories related to the strategic realignment of content following the Merger and are reflected in restructuring and other charges in the Studios, Networks and DTC segments.
All of the above is the accountant talking “WBD has a lot of content that it doesn’t think makes sense for the new business and will get rid of it to write it off the company’s taxes.”
Batgirl wasn’t the only one who apparently fell victim to the very sharp pen of the accounting department. In recent weeks, the company has quietly pulled dozens of shows and movies from HBO Max, often without even notifying their creators. A showrunner The Verge spoke to only learned of his show’s removal from Twitter.
The reason for the removal appears to be that the content was not reaching a large enough audience
The reason for the removal appears to be that the content did not reach a large enough audience, and much of the content was aimed at an audience in which the new Warner Bros. Discovery has no interest: children. Sources told CNBC that “Warner Bros. Discovery has decided to move away from the category with its future investment budget.” Earlier this week, The Daily Beast reported that much of that sacrifice, including layoffs from divisions that oversaw HBO Max’s unscripted content, kids and family and international content, was in part to reorient the service and company to better pursue Zaslav’s real cash cow: Middle America.
“If David Zaslav had his way, he would just schedule Chip and Joanna all day,” an unnamed executive told The Daily Beast. “There was just a massive, ‘We don’t need you.’ You’re not delivering the things we’re focused on.’”
And that’s what it’s doing to Warner Bros. Discovery. But Zaslav’s goal, to create a company that can make money hand over fist, catering to the largest possible audience with a predictable (and cheap) slate of content, isn’t really what the rest of us want.
The excess of content has produced, by its nature, a diversity of content
In recent years, we have enjoyed a renaissance of television. So much television has been made so quickly and for so much money that there is now a shortage of qualified showrunners. So much television has been made that every company is scrambling to fill their new streaming services with things to watch that a wide variety of people have rarely, if ever, had the chance to watch in their lives. represented on television have had this opportunity.
Ten years ago, lesbians frantically watched queerbaiting like Rizzoli & Isles just for the idea of two women being the kind of friends close enough to be romantic. Two weeks ago, Amazon Prime brought us A League of Their Own, a TV show that features an almost-entire cast of queer women and their stories. The excess of content has produced, by its nature, a diversity of content.
But at Warner Bros. Discovery, Zaslav is turning off the content spike and reorienting the company toward something much more fiscally (and potentially culturally) conservative. The company’s stock has been on a downward spiral, but this could be a great thing for Warner Bros. investors. Discovery. It just won’t be as great for the rest of us.