Warner Bros . Discovery is heading into a very important 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. Related Story ‘DC League Of Super-Pets’ Fetches $23M Opening For Warner Bros August had long been rumored to be the month of mass layoffs, with the first wave now expected as early as next week as the honeymoon period for the new regime is coming to an 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. While the streamer has paused new live-action kids and family programming as well as unscripted content, most of the rumors could not be substantiated as HBO Max is preparing for one of its biggest launches ever with the Game of Thrones prequel 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. Also under discussion is a potential unifying moniker for the consolidated WBD streaming platform that would combine the coastal/metropolitan appeal of HBO Max and the Middle America pull of Discovery+. Zaslav was thought to have been keen to changing the name of the streamer when he first discussed the deal but now is believed to have more of an open mind.
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.
Thousands of workers are expected to be affected as the company deals with a “bigger mess” than initially expected. With the last division reports on layoff targets reportedly due this past Friday, the trigger could be pulled at any moment. Mid-August had been recently rumored, but now there is chatter that the first batch could come next week.
After that first wave, a second one is anticipated in September. Overall, the hope is that the majority of layoffs are made over the summer, and the goal is for the cuts to be over before the start of the holiday season. Since the deal was first proposed in May 2021, $3 billion has been repeatedly mentioned as the target for the amount of expense that can be squeezed out of the new operation.
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. High-level insiders tell Deadline that the figure could come closer to $5B. In a research note to her clients in April, Bank of America analyst Jessica Reif Ehrlich called the $3 billion target “highly achievable, if not conservative, given several areas of duplicative expenses (e.
g. , tech, ad/distribution sales force, real estate, etc. ).
” WBD has already made cuts in its sales division, led by Jon Steinlauf, with around 1,000 roles, or 30% of that workforce, axed. Sales remains a primary target for cuts, with marketing, distribution and engineering also rumored to be among the areas impacted the most as the company looks to eliminate redundancies. While most post-merger departures so far have been WarnerMedia employees, rumor is that layoffs on the Discovery side may come first this time.
Word is that division leaders have not been given a headcount to hit, but rather told to present a strategic outlook of how their operations can work more efficiently. 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,” one recently senior exec who exited the company this year told Deadline.
“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. Longtime silos between divisions were removed and a large roster of seasoned execs walked out the door.
The joining together of two media companies in WarnerMedia and Discovery, each with cable TV portfolios, production operations and a streaming platform, has created different challenges. “I don’t think I’ve ever seen someone come in and look to just outright gut a company like this,” one longtime senior Warner vet tells Deadline. The pattern is familiar to those who worked with Zaslav during his 15-year run overseeing Discovery.
“The cuts were constant,” one veteran of those years said. “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!’” The pending cuts may appease long-skeptical investors as WBD, like many media companies, is facing economic headwinds and a challenging financial environment, which likely will be reflected 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 has fallen 38% since it began trading on April 11 and closed Friday at a mere $15 a share. Times have been tough for most stocks lately, but the decline is steeper than that of shares in Disney, Comcast and Paramount in that same time span.
When they come, cuts in the content teams will likely be among the most high-profile. 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. The combined networks group, now led by Nancy Daniels under Kathleen Finch, has cut a number of unscripted series such as The Big D , weeks ahead of its premiere, and let go a number of big-ticket development as well as axed/ended most scripted series such as Chad, Snowpiercer and Kill the Orange Bear.
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.
However, from a buying point of view, HBO Max and Turner Networks spend a lot more on programming, on average, than Discovery. For instance, a show like HBO Max reality series FBoy Island costs between $1. 5M-$2M an hour, compared to a traditional hour of Discovery programming that is pegged around $400,000-$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 Demimonde last month raised the question how the merged business will deal with A-list talent.
The Lost co-creator and his Bad Robot signed a mega five-year overall deal for film and television with the studio in 2019 in a competitive situation. 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 keen to get some projects moving through the pact. That includes shows in the works at HBO Max, which are believed to be moving along despite rumors over the past week to the contrary.
Overall, outside of possible further consolidation with HBO Max, HBO will likely remain business as usual. Zaslav is a noted admirer of what HBO and HBO Max Chief Content Officer Bloys and his team have achieved, as evidenced by him signing the exec to 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.
Sports is expected to be a continued focus for the Turner Networks, which see the NBA and NHL, Major League Baseball and March Madness college basketball as linchpins for the networks. WBD currently pays $1. 2 billion a year for NBA games.
That deal is up at the end of the 2024-25 season, adding another big decision to the new company’s growing list. Elsewhere, IP will be a huge differentiator going forward. 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. Proper management of the big franchises is a top priority, with finding a DC chief who can revitalize the comic book universe the way Kevin Feige has done with Marvel of upmost 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. Film strategy will likely remain focused on 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. He recently brought in former Disney exec Alan Horn , a heavyweight, who will help consult on feature strategy, working with former MGM chiefs Michael De Luca and Pamela Abdy, who recently took over larger portion of the portfolio previously overseen by Toby Emmerich. As he immerses himself into areas in which he has no hands-on experience, like movies and scripted TV, Zaslav has relied on the counsel of industry veterans.
In addition to bringing Horn on board, he also reportedly has sought advice from a number of other former top executives including Peter Roth, who led the Warner Bros. Television Group for many years. As WBD closes the book on its first 100 days, the next 100 might give us an idea about what the future of the company actually looks like.
We may get the first glimpse at that on the WBD earnings call Thursday. .
From: deadline
URL: https://deadline.com/2022/07/warner-bros-discovery-layoffs-streaming-decisions-loom-earnings-1235081582/
