In recent weeks, David Zaslav, the CEO of Warner Bros. Discovery, feeling like a villain on a Real Housewives show. He’s not here to make friends. He is here to make money. Movies have been cancelled, TV shows have been ripped off HBO Max without any preamble, executives have been fired, exacerbating the company’s already remarkable diversity problemand the company has lost $20 billion in its market cap — all in an effort to get $3 billion in savings and hopefully reorient a ship that Zaslav disagreed.
Zaslav’s plan is to focus on making money as cheaply as possible. When he joined Discovery in 2006, it was a small collection of education-focused cable channels. Zaslav turned it into the reality TV monster we know today. He’s made his living serving audiences that don’t pay for streaming, but instead flip the channel on the TV — and if they don’t find anything to watch, pack up and go to the cinema.
So while what we see may be the fumbling of an egotist who has no control over the properties he’s bought, it’s far more likely that Zaslav simply doesn’t care about the things many of us care about, such as “a large spread of direct available content that appeals to smaller groups that are often underrepresented in popular media, all at a fairly affordable price.” Zaslav is not here to better enrich our entertainment landscape – he is here to make money.
Zaslav’s plan is to focus on making money as cheaply as possible
That means he has to relocate a company that has focused its energies elsewhere for two years. In the years leading up to the merger between Warner Bros. and Discovery underwent Warner Bros. quite a radical transformation. COVID changed the way people worked in 2020 (and much of 2021 and even 2022), and Warner Bros. went all in and decided to focus on streaming at the expense of his other businesses.
As someone with a really nice home theater setup and a penchant for quick and easy access to content, this really appealed to me – and I bet it did to you too. Instead of risking illness to see the biggest movies in theaters, we can sit at home and watch King Kong body Mothra over Mexico or Paul Atreides whispering his way to the legend in Dune. While people’s concerns about COVID waned (although it’s still a pandemic, and you’ll need to test and mask on a regular basis indoors!), HBO Max maintained a steady stream of content designed not to compete with traditional Warner Bros. rivals like Disney and Universal but with Netflix, whose movies go straight to the streamer and only make pit stops in theaters to qualify for prizes.
“Why,” I’m sure Zaslav says to himself, “do we have to throw away all that potential money to boost the $15-a-month subscriptions we’re selling for HBO Max?”
And Zaslav’s appeal to theaters is mutually beneficial. Direct to streaming makes a lot of sense for Netflix, a company with a very small distribution arm. Warner Bros. Discovery has built a whole machine for making a lot of money from movies in the cinema. “Why,” I’m sure Zaslav says to himself, “do we have to throw away all that potential money to boost the $15-a-month subscriptions we’re selling for HBO Max?” Instead, the company can put the movies in theaters and then move them to the streaming service and doubly immerse us, the consumers.
Personally, I’m not a fan of that! I don’t want to pay a billion times for the same content. But I’ve been doing it for a while with books, software, movies, and TV. Zaslav knows there are plenty of rubes, like me, who are probably willing to pay.
We don’t know how Batgirl’s shocking cancellation plays into Zaslav’s grand scheme to reverse streaming courses and Warner Bros. Discovery into a much more traditional entertainment giant. Reports about the film ranged from “it’s so bad it should never see the light of day” to “it wasn’t bad and had a really great message.” It may have been canceled because it looked a little too CW to be after the Warner Bros. Discovery logo to appear on the big screen. Or maybe it was canceled to earn a few extra tax dollars while Zaslav & Co. is working to deliver the $3 billion in savings promised by the merger.
The move to cancel Batgirl for tax reasons was weird
When I spoke to Francine McKenna, an accounting teacher at The Wharton School and author of the newsletter, the excavation, she noted that the move to cancel Batgirl for tax reasons was weird. “There are tax benefits to writing off the assets now if you’re the kind of business that likes losses because they offset current or future tax liabilities,” she said via email. “WB is a loser to begin with, so I’m not sure why incremental losses based on finished movies in the trash are so helpful.”
In its Q2 filingsWarner Bros. Discovery didn’t specifically refer to the cancellation, but did outline the general plan in very accounting terms:
Content impairments for the three and six months ended June 30, 2022 of $496 million and $501 million, respectively, and content development write-downs of $329 million for the three and six months ended June 30, 2022 were due to the discontinuation of certain content categories related to the strategic realignment of content after the Merger and are reflected in restructuring and other costs in the Studios, Networks and DTC segments.
All of the above is what accountant speaks for: “WBD has a lot of content that it thinks doesn’t make sense to the new company and will remove it to write it off on the company’s taxes.”
Batgirl wasn’t the only one who apparently fell victim to the accounting department’s very sharp pen. In recent weeks, the company has quietly removed dozens of shows and movies from HBO Max — often without warning their creators. A showrunner who spoke to Custom Hour only heard of their show’s removal from Twitter.
The reason for the cull seems to be that the content didn’t hit a large enough audience
The reason for the selection appears to be that the content did not reach a large enough audience, and much of the content was aimed at an audience where the new Warner Bros. Discovery just has no interest in: children. Sources told CNBC that: “Warner Bros. Discovery has decided to step out of the category with its future investment budget.” Earlier this week The Daily Beast reported that much of this cull, including the layoffs of the departments overseeing HBO Max’s unscripted, kids and family, and international content, was in part to refocus the service and company to better serve Zaslav’s real money cow. Pursue: Central America.
“If David Zaslav had his wish, he would program Chip and Joanna all day,” an unnamed executive told The Daily Beast. “There was just a huge, ‘We don’t need you. You don’t offer the things we focus on.’”
And that’s what he Warner Bros. Discovery is on. But Zaslav’s goal, to create a company that can make money by serving the largest possible audience with predictable (and cheap) content, isn’t really what the rest of us want.
The abundance of content has naturally produced a diversity of content
In recent years we have enjoyed a renaissance of TV. So much TV was made, so quickly and for so much money that there is now a shortage of qualified showrunners. So much TV has been created as every company is scrambling to fill their new streaming services with things to watch that a wide variety of people who have rarely, if ever, had the chance to watch their lives on TV have had that opportunity.
Ten years ago, lesbians frantically looked to queerbaiting fare like Rizzoli & Isles just for the idea that two women could be so good friends that they could be romantic. Two weeks ago, Amazon Prime gave us A League of Their Own, a TV show featuring almost an entire cast of queer women and their stories. The abundance of content has naturally spawned a diversity of content.
But at Warner Bros. Discovery shuts down Zaslav’s content tap and refocuses the company into something much more fiscally (and possibly culturally) conservative. The company’s stock is in a tailspin, but this could very well be a good thing for investors in Warner Bros. Discovery. It just won’t be that great for the rest of us.