Days after closing a megadeal that brought together the Warner Bros. entertainment empire with the unscripted powerhouse of Discovery, mogul David Zaslav outlined his vision for the combined Hollywood giant in a Thursday town hall with staff in Burbank.In conversation with Oprah Winfrey, Zaslav went through how the merger went from a call with AT&T chief John Stankey to reality, reiterated his reverence for the history of the Warner Bros. studio and addressed remote work options for staff. Winfrey asked if the eventual plan is for “one big streaming channel,” which Zaslav responded affirmatively to.“That’s where we go,” Zaslav stated, about the idea of a unified streaming platform bringing together HBO Max and Discovery+, with a caveat: “It’s gonna take us a little while” for technology to allow that to happen.Zaslav added, according to a source: “We have almost 40 channels on any given night, 40 percent of Americans watching one of our channels and so we have we create one platform, but we have so much content that we have to figure out how do we use that content to nourish?”The next step for leadership will be integrating teams and then taking steps to figure out where the estimated $3 billion-plus in cost synergies, touted as part of the deal rationale, will be found. (At the time of the merger announcement, in May 2021, the plan was to invest that savings in additional content spend.) In reply to Winfrey’s question that appeared to hint at cost synergies or cuts, Zaslav asked staff to “be patient with us” since it’s going “to take us a little bit of time and we’re going to try and be as transparent and honest and direct with you as possible. We’ve been we’ve been a company that’s grown by acquisition.”Winfrey pressed on the $3 billion-plus in estimated cost synergies, to which Zaslav reiterated his stance that “cost avoidance” will also be considered. “We don’t know exactly how it’s going to work,” Zaslav told employees. “But on the $3 billion I’d put it in a couple of categories. One is there are a lot of businesses that Warner is in that Discovery is not in and vice versa.”The CEO added: “I would say the majority of the savings is going to be investment avoidance. So for instance, we were going to spend $600-$800 million promoting Discovery+, Warner was going to spend $800-$1 billion dollars promoting HBO Max.” With one platform, that type of spending isn’t doubled, the executive explained.As another example, Zaslav talked about the hiring of engineers for the streaming platform. “We had in our plan to hire a lot more engineers. Now when we come together, we have thousands of engineers, one who has thousands of engineers, we don’t have to hire many more thousands of engineers. So there’s a lot of cost avoidance,” the executive said.Zaslav was also asked about remote work amid the pandemic, and how workplace culture has changed in the two years since COVID-19 shutdowns rippled across offices and productions. “I don’t think we’ll ever get back to five days a week,” Zaslav said about in-office work, “but I really believe in being together.”The CEO elaborated: “You don’t build a narrative on Zoom. You don’t get a mentor on Zoom.”AT&T and Discovery Inc. completed a $43 billion merger on April 8, creating Warner Bros. Discovery (trading as “WBD”). The company — which brings together streaming platforms like HBO Max and Discovery+, comics brand DC, networks like HGTV, Food Channel, TNT and Cartoon Network and global news giant CNN — traded just under $25 a share on Thursday, up slightly from about $24 at deal close.In the lead-up to sealing the merger, nine executives from AT&T’s WarnerMedia leadership, including CEO Jason Kilar and chair/CEO of studios and networks Ann Sarnoff, were cleared out in April. Newly minted Warner Bros. Discovery chief Zaslav installed his trusted lieutenants among the thirteen executives that were elevated and installed as top leaders, including CFO Gunnar Wiedenfels and Kathleen Finch, chair and chief content officer for U.S. networks.Zaslav also unveiled plans to hire a chief diversity, equity and inclusion officer as well as a chair and CEO to oversee Warner Bros. Discovery Sports. The combined firm now holds major league sports rights across multiple leagues in the U.S. and Latin America and Europe, as well as the Olympics in Europe, through 2024.The logic for the merger stemmed in part from the idea, as Zaslav noted in unveiling his executive picks, that Warner Bros. Discovery would have “a singular strategic focus as a global pure-play content company,” combining the prestige scripted assets of the historic Warner Bros. studio and HBO with the popular unscripted from Discovery like Magnolia Network. Zaslav has also been bullish about Warner Bros. TV, producer of Apple TV+’s Ted Lasso and ABC’s Abbott Elementary, describing it on February’s earnings call as among “leading content arms dealers in the industry.”That still leaves potential duplication in product, tech, administration, human resources and legal and other corporate functions, as speculation turns to job cuts. Zaslav, in addressing cost synergies in February on an earnings call, pointed to duplication at HBO Max and Discovery+. “Right now we’re running two completely separate, direct-to-consumer technology stacks of marketing operations. We’re spending roughly $6 billion for technology and marketing between HBO Max and Discovery+,” Zaslav noted.The deal for AT&T’s WarnerMedia assets marks the latest major move from Zaslav’s Discovery, which bought Scripps Networks Interactive, then home of HGTV, Travel Channel and Food Network, in 2018 in a $14.6 billion cash and stock deal. Cost synergies from that deal were initially were estimated at $350 million, but that figure was later raised.Zaslav’s new team arrives as Warners is readying Fantastic Beasts: The Secrets of Dumbledore on April 15 in a test of that franchise’s box office draw, while the studio’s The Batman ($737 million globally) starts its run on HBO Max on April 18. Meanwhile, CNN’s new streaming offering CNN+ is weeks removed from its March 29 launch date and faces questions about its long-term viability as a standalone service. An eventual combination or bundle of HBO Max with Discovery+, which launched in January 2021, is the plan. Discovery has about 22 million paying streaming subscribers globally, while HBO and HBO Max combine for 73.8 million global subscribers.On Wall Street, Bank of America analyst Jessica Reif Ehrlich initiated coverage of the merged Warner Bros. Discovery with a “buy” rating and $45 price target on April 13, caveating that there will be “some near-term volatility in the stock price as shareholders digest this new transaction.” Meanwhile, MoffettNathanson analysts gave the firm a “Neutral” rating and $27 price target to start its coverage on April 11, citing an “elevated debt load” and AT&T shareholders who may be inclined to sell their stakes in the near-term.
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