David Zaslav On DC Rising, Ad Market Tanking, HBO’s Losses & WBD’s New Streaming Playbook

David Zaslav channeled his inner John Dutton today: “We have an awful lot to do, and an awful lot to undo,” he said, crediting the line to Kevin Costner’s Yellowstone patriarch in the Season 5 premiere, with a shoutout to the Paramount show. Zaslav’s hard-to-wrangle ranch is a merged Warner Bros. Discovery.

“It was much more challenging than we thought. You opened up the closet, things fell out. We are fixing them. Some assets are better than we thought at the core – the talent is better than we thought. But there was a lot that was unexpectedly worse than we thought. For me, I don’t want to buy a company that is really well run. It’s hard to make it better. So every day we open a closet, and something comes out,” the chief executive said during a wide-ranging keynote conversation at the RBC Media conference touching on a streaming rethink, overpriced sports, challenged advertising, DC leadership, theatrical windows and linear television. He retread some ground from a recent earnings call, his goal to convince Wall Street to look beyond the noise of cost cuts, layoffs and canceled shows. The company fell short of Wall Street expectations last quarter due to a slower advertising and merger restructuring charges.

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Streaming: The company has a chance to remake it. The business logic behind streaming has been “irrational” with companies spending massively on content for low-fee products that didn’t end up attracting enough subscribers to make them profitable. That’s become clear in a stream of financials this year. Consumers churn in and out. “Right now, we can get 30 million people with Euphoria, but they can come on for two months, watch Euphoria and then leave. Do we want to create incentives for people to be there? There are a lot of companies that have a business where the majority of people are there for the year.”

He said HBO spent $2.5 billion on content in 2019, and made $2.5 billion that year. Last year, he said, it spent almost $7 billion on content and lost $3 billion. “I don’t know if I’ve ever seen anything like that,” he said, noting “all those direct to streaming movies just thrown right on top” of the service.

“Our whole library went on HBO Max. We weren’t selling any of it. But it was all on there. We looked, and we said, most of that is not being watched, or we don’t think anyone is subscribing because of this. We could sell it non-exclusively to someone else.”

Coming in the spring, a new DTC launch combining Discovery+ and HBO Max. A free service may join premium and ad-light tiers. “We can create a Tubi and a Pluto. But instead of buying content for someone else to populate our AVOD, we can create the content ourselves.”

That said, he called the ad market currently “very weak” — even worse than it was during Covid. Europe is better than the U.S, he said. where advertisers are waiting to see how things play out for the economy, inflation, interest rates and consumer spending.

The company reported 94.9 million direct-to-consumer subscribers in the third quarter, primarily spanning HBO and the Discovery+ and HBO Max streaming service.

Theatrical windows: Zaslav’s a fan. “I’ve seen the data… A movie that opens in theaters perform five times as well as when it goes directly to streaming. The economic return when you open something in the theater.” Direct to streaming “was just a way to drive subscribers to drive the share price. Subscribers today are like clicks in the ‘90s. People were running around buying companies and aggregating clicks.”

DC: A “hugely undervalued asset. Disney did a wonderful job with Marvel. But if you looked at Marvel and DC ten years ago, you would have said DC is as good or better. But Marvel is a connected universe. It has a ‘bible.’ The key was having one person following everything. All of Marvel is one place. You don’t wake up and find that there has been a Batman TV show someplace.”

“DC is one of the biggest opportunities this company. Our company is a creative company and so we found two great guys.” Filmmaker James Gunn and producer Peter Safra started as studio co-chairs this month. “You will see a lot of growth around DC. We haven’t done a Superman movie in 13 years.” The idea is “to drive the hell out of DC, which is what they are going to do.” Aquaman and the Lost Kingdom is coming in 2023.

Sports/NBA – “On sports we are a renter. It’s not a good business to be a renter.” Any new NBA deal “would look a lot different” and hinted again at the NBA on HBO Max and with an expanded role for the Bleacher Report and House of Highlights. “We have enough sports without having to do a new deal with anybody. We would like to do a deal with the NBA, but you will see us being very disciplined on sports

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