Challenges Remain For Newest Media Giant

Two weeks after AT&T announced it was spinning off WarnerMedia to the much smaller Discovery, executives flocked to the Warner Bros. lot in Burbank for a glimpse of their future — and the man who would lead them there.

The L-A Times reports Discovery Chief Executive David Zaslav, the architect of his company’s audacious $45-billion takeover of WarnerMedia, sought during a Tuesday town hall meeting to reassure battle-weary troops that — unlike their current parent, AT&T — Discovery is all about creating programming that audiences crave.

The hard-charging 61-year-old executive stressed his respect for the Turner networks, including CNN, as well as HBO and the Warner Bros. film and TV studio, which has churned out cultural touchstones for nearly a century.

“We’re not coming in here thinking that we know all the answers,” Zaslav told the crowd of about 75 film and TV executives admitted into the studio’s Steven J. Ross Theater, according to a person who saw a video stream, which was watched by hundreds of other WarnerMedia workers around the country. “There’s a ton we don’t know,” Zaslav added, “and there’s certainly a whole bunch that you know that we don’t know.”

David Zaslav

Zaslav’s message was well received but also underscored the myriad challenges he will face if regulators approve Discovery’s effort to buy a company that is more than twice its size.

New York-based Discovery, which owns such popular cable channels as Food Network, HGTV, Animal Planet and OWN, is scrambling to adapt as consumers ditch cable TV for streaming platforms. Discovery derives most of its revenue from cable TV channels. Even after the merger, an estimated 80% of Warner Bros. Discovery’s pre-tax earnings in 2024 will still be tied to its legacy cable channels, research firm MoffettNathanson said in a note.

And Discovery must sit on the sidelines in a fast-changing media environment as the merger moves through the government’s review, which could take more than a year. Discovery has said it hopes to complete the takeover in mid-2022, but for now the companies will continue to operate as separate entities.

The regulatory delay will give competitors Netflix, Amazon, Disney, Comcast and ViacomCBS more time to get traction for their streaming services, which could leave WarnerMedia’s HBO Max and Discovery+ at a disadvantage.