Benched by the NBA, Warner Bros. Discovery boss David Zaslav faces tough questions
David Zaslav didn’t expect it to be this difficult.
Two and a half years ago, the veteran TV executive brimmed with confidence and pride that a guy from Brooklyn, who elbowed his way into entertainment through the not-so glamorous job negotiating cable distribution deals, was being handed the keys to “the best brands in entertainment.”
But since the April 2022 merger that created Warner Bros. Discovery, its marquee brands — HBO, CNN, TNT, Food Network and the Warner Bros. film and TV studio — have slipped in scale and ambition. The latest blow came this week when the National Basketball Assn. formally rejected Warner Bros. Discovery’s last-ditch effort to stay in the game.
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After 35 years of broadcasting basketball, the company’s TNT channel is getting benched. Instead, the NBA picked Walt Disney Co.’s ESPN, NBCUniversal and Amazon Prime Video as its broadcast partners, beginning with the 2025 season.
“The NBA was one of the crown jewels, something that defined TNT,” Stephen Galloway, dean of Chapman University’s Dodge College of Film and Media Arts, said. “It’s a watershed moment when you lose something like this.”
Warner Bros. Discovery reacted angrily after the league rebuffed its effort to match Amazon’s package.
In a statement, TNT Sports accused the NBA of “rejecting the many fans who continue to show their unwavering support for our best-in-class coverage.” The current agreement allowed TNT to match rival offers, it said, adding: “We will take appropriate action.”
Warner Bros. Discovery on Friday sued the NBA, alleging it breached its current deal by allegedly refusing to honor Turner’s rights to match the offer from Amazon.
The NBA dispute adds to the growing scrutiny Zaslav has faced since taking the reins of the famed Hollywood studio and prestigious TV properties.
Warner Bros. Discovery’s stock has lost two-thirds of its value since the April 2022 merger, prompting some on Wall Street to call for its breakup. The company, whose revenues dropped 4% to $41 billion in 2023, posted a net loss of $966 million the first quarter of this year.
Executives spent the last two years searching for cuts to pay down debt taken on to buy out former owner, AT&T, and investors are getting restless. Shares fell nearly 6% Thursday to $7.99.
Zaslav declined a request to be interviewed for this article.
David Zaslav’s success or failure turning around Warner Bros. Discovery could dictate the future of the film studio and storied television brands.
Warner Bros. Discovery this month laid off nearly 1,000 workers, the latest among thousands of job cuts since the merger.
In a symbolic demotion, longtime television tastemaker HBO landed in an uncharacteristic third place during this year’s Emmy Award nominations with 91, trailing Netflix and Walt Disney Co.’s FX. HBO attributed its showing to the slow return of cachet dramas after last year’s Hollywood labor strikes.
“This is a company with incredible assets — but it’s just not growing, and that’s the problem,” said Bank of America Securities media analyst Jessica Reif Ehrlich. “For these assets to have that stock price is just untenable. ... They can’t go on like this.”
Scouring for cuts
In some ways, Zaslav and his team were victims of bad timing.
Just as they were finalizing the AT&T buyout, Wall Street began souring on media companies that were losing billions of dollars to build streaming services to compete with Netflix.
“David Zaslav inherited a very challenging situation ... righting the ship after AT&T management,” said Jason E. Squire, a professor emeritus at USC’s Cinematic Arts school. “It’s a very tough environment for entertainment companies these days.”
People close to Zaslav acknowledge the struggles have been greater than the company anticipated when the merger was negotiated in early 2021 — a deal that saddled the combined company with nearly $55 billion in debt.
Since then, the company has paid down about $16 billion of debt “naturally through organic cash flow and not by selling any assets, which is to their tremendous credit,” said Steven Tian, a research director at Yale University’s School of Management. “[Zaslav] has taken out $3 billion in expenses ... he’s targeting up to $5 billion.”
To get there, Zaslav has been scouring every corner for cuts — at times alienating TV fans and Hollywood talent who viewed the reductions as bleeding the company’s franchises.
Steven Spielberg, Paul Thomas Anderson and Martin Scorsese will be involved in curating the classic film channel which will now operate under the company’s top film studio execs.
The company pulled TV episodes, including “Sesame Street,” from its streamer, Max. The nearly finished $90-million “Batgirl” movie was dumped and an animated and live-action caper movie, “Coyote vs. Acme,” about Looney Tunes’ accident-prone Wile E. Coyote character, was shelved. Executives canceled talent deals and streaming shows, including the pirate comedy “Our Flag Means Death.”
Fans denounced the move on the X platform (formerly Twitter), spreading the hashtag #FireDavidZaslav. The slogan bubbled up Wednesday amid the NBA woes.
Even the small and beloved Turner Classic Movies channel wasn’t spared. Last summer the company fired, then quickly rehired, the channel’s senior vice president for programming after a backlash from fans, including top directors Steven Spielberg, Paul Thomas Anderson and Martin Scorsese.
“In Hollywood, brands are driven by people,” Galloway said. “They are not making widgets or cars [and] these executives are making risky entertainment projects based on their relationships and artistic judgment.”
A protégé of Jack Welch
Hollywood embraced Zaslav’s arrival at first, despite knowing he lacked experience running a major Hollywood film and TV studio.
A lawyer who joined NBC in 1989 to help build its cable business and CNBC, Zaslav was a protégé of Jack Welch, the late General Electric chief who was dubbed “Neutron Jack” for his ruthless cost-cutting and layoffs.
During his 15 years leading Discovery, Zaslav had witnessed the power of low-cost reality TV, such as “Shark Week” and “90 Day Fiancé.” The 2018 purchase of HGTV- and Food Network-owner Scripps Networks buoyed Discovery with popular comfort-food programs, including “Property Brothers” and “Fixer Upper,” with Joanna and Chip Gaines.
“He wears Patagonia vests. He’s not concerned with stature,” Spielberg said in a glowing 2021 Vanity Fair profile, “All That Zaz.”
Zaslav, 64, has long been among America’s highest paid executives. He relished the role of movie mogul, purchasing the Beverly Hills mansion of late “Chinatown” producer Robert Evans and moving into founder Jack Warner’s gilded Art Deco office on the Warner Bros. lot.
He was eager to absorb Warner’s assets because he recognized Discovery’s channels, and its streaming service Discovery+, weren’t big enough to compete against Netflix. And the shift to streaming would spell trouble for companies like his that depended on cable channels.
The CEO moved rapidly to dismantle AT&T’s initiatives, including shutting down the streaming service CNN+. Zaslav wanted to steer CNN to the center of the political spectrum, something Warner Bros. Discovery investor John Malone, a cable industry pioneer, had called for.
But CNN, already reeling from ratings declines and its loss of longtime leader Jeff Zucker, was plunged into chaos.
Troubles at CNN
Anchor Don Lemon — who had helped CNN achieve ratings highs during the 2020 George Floyd protests — was shifted from CNN prime time to mornings, then ousted.
Zaslav canned his first choice to run CNN, Chris Licht, after an embarrassing profile in the Atlantic.
Landing this year’s first presidential debate should have given CNN’s beleaguered team a lift. Instead, President Biden’s faltering performance dominated the news cycle for weeks, and the network’s anchors were criticized for not pushing back on former President Trump’s untruths. Since the debate, CNN disclosed 100 layoffs.
CNN’s prime-time ratings are down 61% compared with 2020, the last presidential election year (although that year included news coverage about COVID-19). The network has seen gains in recent weeks as the race turned tumultuous. CNN has averaged more than 1 million viewers in prime time, according to Nielsen numbers, a third of Fox News’ audience.
Zaslav defended aggressive cuts at the media giant, framing them as part of a broader rethinking of how the company works.
Despite cable customer defections, the company’s programming attracted 7.4% of all TV viewing in June, according to Nielsen data. Warner Bros. Discovery channels, including its streamer Max, make up the sixth most-popular destination for viewers, behind Disney, YouTube, NBCUniversal, Netflix and Paramount Global.
Losing the NBA deal
The loss of the NBA contract — a vestige of the Ted Turner days — could hurt the cable channels.
“It’s a shame,” said Scott Robson, senior research analyst within S&P Global Market Intelligence’s Kagan group. “NBA on TNT has been good to help maintain ad revenue, and it also helped during carriage negotiations [with pay TV operators] because it brought valuable content to the forefront.”
Analysts and investors have spent months questioning the company’s NBA strategy. In late 2022, Zaslav said his company “didn’t have to have the NBA,” and then it failed this spring to wrangle a deal during TNT’s exclusive negotiating period as the price soared.
Basketball legend Charles Barkley, longtime co-host of TNT’s fan-favorite “Inside the NBA” show, was furious, calling his bosses during a May radio show appearance “clowns” and “fools.”
But others said TNT could no longer afford the NBA’s skyrocketing fees, arguing that projected financial losses would have outweighed any benefit.
The deal signed by NBCUniversal will pay the NBA $2.5 billion a year, twice the amount TNT currently pays.
“It’s getting close to that tipping point for a lot of networks,” Robson said.
A Times survey tallies the paydays for the heads of Warner Bros. Discovery, Netflix and more. The issue has become a hot topic on picket lines during the writers’ strike.
Some insiders tried to shrug off the NBA loss, saying the money could instead be used to develop movies, TV shows and games.
Warner Bros. Discovery spends $20 billion a year on programming, using about 60% of the cash it generates on content, said a knowledgeable insider who was not authorized to comment.
Growing streaming subscribers has been a slog. The company last year stripped HBO from the title in a bid to widen the service’s appeal, calling it plain Max, but that didn’t move the needle. Instead, the rebranding triggered complaints in Hollywood that HBO’s high-quality programming was getting lost in the shuffle.
Filmmakers are rallying behind ‘Coyote vs. Acme,’ the Looney Tunes movie killed — and later resurrected — by Warner Bros. Discovery.
Zaslav also shook up the Warner Bros. film team. The Burbank studio has launched big hits, including last year’s “Barbie” (2023’s highest-grossing blockbuster), “Wonka” and “Dune: Part Two.” But it has also fielded some notable misfires, such as “Furiosa: A Mad Max Saga” and “The Flash.” The DC superhero movie unit is in reset mode as James Gunn and Peter Safran prepare to give the franchise a jolt next year with the big-screen return of Superman.
One of Zaslav’s biggest challenges is to convince investors that Warner Bros. Discovery still can rebound.
The company should explore a sale, a merger or “asset sales” because the current configuration “is not working,” Reif Ehrlich wrote last week.
Zaslav has taken some steps to partner with other programming companies. Warner Bros. Discovery is part of a streaming joint venture, called Venu Sports, with Disney and Fox Corp. that is expected to launch this fall. And beginning Thursday, consumers will be able to subscribe to a bundle that includes Max and Disney’s more popular entertainment services, Disney+ and Hulu. An ad-supported version is priced at $16.99 a month; or $29.99 for an ad-free version.
He’s approached rivals, including Paramount Global’s prospective new owners about combining Max with their products, according to sources not authorized to comment.
Warner Bros. Discovery Inc. CEO David Zaslav was awarded compensation of $49.7 million in 2023, a year when the media giant initiated steep job cuts.
To be sure, many of Warner Bros. Discovery’s woes are being felt industry-wide.
“Pay TV fell apart way harder and faster than even the most bearish estimates,” Reif Ehrlich said. But, she added, some of the wounds were self-inflicted.
The analyst pointed to a misstep last year, when Zaslav hailed a troubled D.C. film, “The Flash,” as “the best superhero movie I’ve ever seen.” But the movie, with a reported $200 million budget, stumbled out of the gate.
“If you set these unrealistic expectations and then don’t deliver — that’s when problems start,” Ehrlich said.
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