How Warner Bros. Merger Works  Discovery and what awaits us

How Warner Bros. Merger Works Discovery and what awaits us

How Warner Bros. Merger Works  Discovery and what awaits us

  • Warner Bros. Discovery was launched in 2022, combining a rich array of properties from HBO to CNN.
  • The mega-merger faces challenges including massive debt and rising content costs amid economic hardship.
  • CEO David Zaslav reduced content and staff. Read about how his strategy works and what awaits him.

David Zaslav enjoys a rally in stock prices after Wall Street analysts expressed more optimism about Warner Bros. Discovery, which has a lot of cost cuts and future growth behind it, as it plans to launch a new streaming service.

AT&T’s WarnerMedia merged with Discovery in 2022 in a $43 billion deal, creating a content giant combining HBO Warner, CNN and famed film studio Warner Bros. with Discovery’s lifestyle and reality.

The promise was to create a media powerhouse with a new streaming giant that could compete with Netflix and Disney.

But the threat of recession, inflation, a declining advertising market and a hardening streaming market have made the job of CEO Zaslav and his team of merging the companies – and lowering WBD’s approximately $50 billion in debt – much more difficult.

As the company looks to squeeze more than $3 billion in synergies from its units, management has cut back on creative projects and hiring.

Zaslav grapples with strategic issues at CNN, the task of launching a new streamer, and growing competition for the best sports rights – all the while dismissing rumors of a sale to Comcast and a share price that has fallen more than 50% since the deal was made, before jumping in January.

Here’s everything you need to know to learn more about the merger, the challenges ahead, and how Zaslav plans to meet them.

New leadership to meet the challenges of integration and synergy

Zaslav quickly assembled a team of Discovery veterans who have been together for decades to help him integrate and lead the new company. As part of the merger, top WarnerMedia leaders left, starting with WarnerMedia CEO Jason Kilar and including most of his deputies such as WarnerMedia Studios and Networks Group CEO Ann Sarnoff and HBO Max CEO Andy Forssell.

The new team set out to evaluate each service for cost savings and ways to increase ad revenue and viewership across the organization.

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Layoffs and cultural conflicts as 40,000 employees come together

After closing the transaction, Zaslav and his team faced the gigantic task of integrating two companies with 40,000 employees worldwide. Waves of layoffs followed as he and his management team scrambled to find the promised $3 billion in “synergies”, an amount they later increased to $3.5 billion.

One of Zaslav’s earliest and most dramatic moves was to shut down CNN’s streaming service, CNN+, just weeks after its launch, eliminating hundreds of jobs. There have been buyouts and layoffs in ad sales teams.

WBD also shut down most of HBO Max’s unscripted divisions and TBS/TNT teams, as well as retiring from CNN originals.

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A new content strategy that could tarnish HBO’s crown jewel

WBD has also been looking to cut costs and revenue by shifting its content strategy ahead of the merger of HBO Max and Discovery+ into a mega streaming service due to launch this spring. We hope the new streamer will reduce churn, lower costs and increase subscriptions by maximizing the content and features of both brands.

It’s a tough job that needs to be done without disrupting the user experience. There are also questions about how to brand the new service and make consumers pay more; HBO Max is already at the top end of the streaming market, now costing $16/month for the ad-free version.

WBD shocked entertainment insiders by canceling high-profile projects like Batgirl and ripping episodes of shows including Sesame Street from HBO Max, and made other moves that involved Hollywood creations. The changes to WBD’s crown jewel, HBO, and its programming were seen by some stakeholders as a threat to the brand’s prestige.

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CNN rebuilding after hundreds of staff layoffs

2022 was a year of massive layoffs and organizational changes at CNN. Zaslav surprised viewers by choosing Chris Licht, a long-time acquaintance but who had never run a news company the size of CNN, to rebuild the network.

Following in the footsteps of the popular Jeff Zucker, Licht had a rough start. It made a series of cost cuts, including hundreds of layoffs. He also made sweeping programming changes and tried to position the network as less partisan, leading to head scratching and confusion about strategy.

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DC Comics, box office battle and sports rights

Zaslav tried to improve relations with Hollywood and theater owners, but the cancellation of major projects, delighting Wall Street, sowed distrust among the creators. He found a new DC Comics leader – James Gunn and Peter Safran – ending a long search, but the unit runs into obstacles, with many different sides in the mix, each with their own vision.

WBD wants to remain a big player in the sport, so Zaslav will battle rivals for increasingly expensive sports rights, starting with the NBA. To succeed, it will also need to balance investment in WBD’s streaming business without hurting the linear TV business.

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