Warner Bros. Discovery gets new logo, but challenges lie ahead

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

Discovery chief executive David Zaslav, the architect of his company’s daring $ 45 billion takeover of WarnerMedia, sought at a town hall on Tuesday to reassure battle-weary troops that, unlike their current parent company, AT&T Discovery, is all about creating programming that audiences want.

The 61-year-old executive underscored his respect for Turner networks, including CNN, as well as HBO and the Warner Bros. film and television studio, which have produced cultural touchstones for nearly a century.

Didn’t come here thinking we knew all the answers, Zaslav told the crowd of about 75 film and television directors admitted to the Steven J. Ross Theater studios, according to a person who saw a video stream, who has been watched by hundreds of other WarnerMedia employees across the country. There’s a ton we don’t know, Zaslav added, and there’s definitely a whole bunch you know we don’t.

Zaslav’s message was well received, but also highlighted the myriad of challenges he will face if regulators approve Discovery’s efforts 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 television channels. Even after the merger, about 80% of Warner Bros. pre-tax profits Discovery in 2024 will still be tied to its old cable channels, research firm MoffettNathanson said in a note.

And Discovery must sit on the sidelines in a rapidly changing media environment as the merger goes through government scrutiny, which could take more than a year. Discovery said it hopes to finalize 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 take advantage of their streaming services, which could put WarnerMedias HBO Max and Discovery + at a disadvantage.

These two companies are at a critical juncture in the construction of their [streaming] products, and now they’re going to focus on other things, said Cowen & Co. media analyst Doug Creutz. David [Zaslav] Looks like, hey, we can walk and chew gum at the same time and, on the Discovery side, they probably can, but that’s another matter on the AT&T side. Are they going to be able to roll out HBO Max and achieve the level of success they want when everyone else is so distracted?

Creutz noted that after Rupert Murdoch announced he was selling much of his entertainment company, 21st Century Fox, to Disney, existing Fox companies suffered as executives questioned their place in the new. regime and that the merger lasted nearly a year of regulatory reviews. During the interim, Foxs’ film business all but collapsed, Creutz said.

Another key challenge, analysts say, is trying to figure out how to position their respective streaming services, including an expected offering from CNN to attract millions of customers in the United States and abroad.

The major challenge that I see is going to be to have a complete offering bringing together a platform that is going to be competitive in streaming, and I don’t know if they necessarily have a lot of time to do it, Tuna Amobi, analyst at CFRA Research, mentioned . To succeed in this race, you need to have a very credible overall strategy.

Since AT&T absorbed Time Warner for $ 85 billion in June 2018, there have been multiple management reshuffles, more than 2,000 layoffs, and controversial moves that have tested Hollywood’s faith. AT&T took the plug on the beloved classic movie streaming site FilmStruck and then bet the company on HBO Max, a streaming service that got off to a rocky start a year ago due to a hefty price tag (14.99 $ per month) and a shortage of original programming. Morale has plunged. This week, WarnerMedia introduced an HBO Max version with advertising and a lower price ($ 9.99 per month) in an effort to attract subscribers.

The company has also been grappling with the fallout from its much maligned decision to release all Warner Bros. movies. 2021 on HBO Max the same day they hit theaters, which infuriated powerful producers and directors.

If regulators approve the deal, Zaslav will become the company’s fourth CEO in less than five years. Current WarnerMedias chief executive Jason Kilar, who joined the company just 13 months ago, is expected to leave once the merger is complete.

When the two companies come together, they will also be burdened with debt estimated at $ 58 billion. Most of that debt will come from the $ 43 billion payment that will go to AT&T under the deal. (AT&T shareholders, at launch, will own 71% of the shares of the new autonomous company).

Zaslav said he projects $ 3 billion in savings by 2024, which typically means more job losses, causing more anxiety for a workforce that has suffered substantial layoffs under AT&T .

It must be tough working there right now, Creutz said.

Analysts also expect inevitable cultural clashes between two very different societies. Discovery is an unscripted television giant, while the strength of Warner Bros. and HBO has a long history of providing premium scripted TV shows and movies.

As for the cost of producing Warner Bros. movies and HBO shows, there could be sticker shock, media veterans said.

David is a happy guy but he’s not a Hollywood guy, Creutz said. Much of Discovery’s success has been the highly efficient production of unscripted television productions. Scripted content is inherently less effective and more expensive. It’s not, hey we need another home buying and selling show, let’s get out the cookie cutter.

Zaslav who wore a business blazer and khakis made a good impression at Tuesday’s event, according to those in attendance.

He spoke at length about his biography: his roots in Brooklyn, the moment he realized he had no desire to be a corporate lawyer in a firm in a big city, his transition to NBC. and helping launch CNBC, and making Discovery a global business since becoming CEO 14 years ago.

Warner Bros. has produced the best content in the past 98 years, Zaslav told the crowd, according to the person who watched the town hall on video. Warner Bros., with its iconic logo, is imprinted in all of us, Zaslav added.

A senior executive who attended the meeting said: People respected the fact that he flew across the country to say hello. Everyone felt better because they respected the history and legacy of Warner Bros. and the importance of high quality content.

Still, there were some puzzles. When Zaslav listed the HBO shows he admired, most were produced over a decade ago, including The Pacific (2010), Band of Brothers (2001), Entourage (2004), and Sex and the City ( 1998). He praised HBO’s current success, with Kate Winslet, Mare of Easttown. (And The Pacific reruns on HBO over the holiday weekend.)

Zaslav’s quick decision to announce the company’s new name, Warner Bros. Discovery, and a temporary logo may also have failed. Opinions were divided on the proposed name and logo. Many saw it as an elegant decision to put the name of Warner Bros. first and bring back the Bros. of the nickname, another nod to the roots of the studios. At least it was less awkward than WarnerMedia, some thought.

Several people have described the proposed logo as a bit cheesy, comparing the yellow, blocky font to title cards from period Superman movies and even Steven Spielberg’s 1980s TV anthology series Amazing Stories.

The Warner Bros. logo Discovery.

(Discovery)

After the meeting and amid the ridicule on social media, Discovery executives pointed out that the logo was preliminary.