David Zaslav was officially named Monday to lead a new combination of WarnerMedia and Discovery, propelling him to the top ranks of operators in the industry and offering just the latest example of consolidation among media conglomerates as the rise of video streaming continues to upend the entire sector.
Zaslav’s ascension is part of a surprising move by AT&T and Discovery to pool their media resources and make a bid to compete more directly with large rivals like Netflix, Walt Disney and NBCUniversal. Under terms of the deal, AT&T shareholders will control 71% of the new company, while Discovery shareholders would own 29%. The boards of both companies have approved the pact and the transaction is expected to close in mid-2022, subject to approval by regulators and Discovery shareholders. Two key Discovery backers, the media executive John Malone and the media company Advance, will vote in favor of the transaction.
In remarks made Monday morning, the executive vowed to run the combined entity — a new name could be unveiled later this week — with “one culture, one mission,” though it seemed clear he needed time to determine a new executive team and to answer questions about integrating assets. There was no position designated for WarnerMedia CEO Jason Kilar, and Zaslav offered no detail on a potential role for Jeff Zucker, the head of WarnerMedia’s CNN and sports operations, who is slated to leave his current job at the end of 2021. “We will be trying to figure out how do we get the best and brightest to stay,” Zaslav said.
Zaslav has led Discovery since 2007 and his relentless business focus has kept the company competitive even though it is smaller in scale than several of its rivals. When Discovery-owned cable networks start to flag, Zaslav doesn’t shut them down; he rebrands them with new themes and programming. When a new goal comes into focus, Zaslav doesn’t let operating executives charged with the task wander away to get it done; he checks in with them constantly, demanding updates and new information. And though Discovery isn’t the sector’s biggest company, he has worked to grow it, buying up the cable networks of the former Scripps Networks and striking content deals with Oprah Winfrey and home-renovation gurus Chip and Joanna Gaines. Now he will have a broader portfolio of resources as his company and AT&T form a joint venture that will marry his company’s TLC with Warner’s TNT and TBS; the flagship Discovery Channel with Warner’s DC Comics characters; and lifestyle-focused Food Network with Warner programs that include “The Flight Attendant” and “Full Frontal With Samantha Bee.”
The marriage marks an abrupt turnaround for AT&T, which is jettisoning its Warner assets after slightly less than three years of operating them — slightly longer than control of the company after the merger of AOL and Time Warner, another vaunted media combination that foundered as a downturn in advertising undercut the rationale for the two companies’ decision to join in 2001. Now Zaslav must restructure the companies on the fly, just as the media industry enters its annual “upfront,” a period when TV companies try to sell the bulk of their commercial inventory for their next cycle or programming.
AT&T needed to focus more intently on its U.S. telecommunications business, John Stankey, the company’s CEO, said on Monday. WarnerMedia’s business would require new investment to make it competitive as media companies work to create new streaming hubs that attract global audiences, he said, and AT&T needed to invest capital in 5G technology and a U.S. fiber footprint. The pact leaves AT&T “with the right capital structure,” he said, and “‘better products are going to come from the media company and the communications company as the result of making this change.”
But AT&T ownership tenure has been roiled by churn. Top WarnerMedia executives who helped build HBO and Tuner Sports were ousted. The company went without an ad-sales chief for a year. And even AT&T’s own picks for executives to supervise content — veterans including Bob Greenblatt and Kevin Reilly — found themselves as part of the overall executive exodus. There may be more: Kilar was only mentioned tangentially in Monday’s discussions, with Stankey noting he remains in charge of the current WarnerMedia and acknowledging that Zaslav would need time to determine his own operating team.
AT&T needed to get out of the business, said Stankey. “It became clear to me over the last several months….that we were hitting escape velocity,” said Stankey. “It became clear to me we were going to need a different capital structure.”
Zaslav made plain he intends to blend the new company’s assets, not keep them in separate fiefdoms. He articulated a vision that would make use of WarnerMedia’s sports deals with the NHL, MLB and NCAA and Discovery’s portfolio of European sports rights, one that would incorporate Discovery’s international news operations with CNN’s U.S. and overseas properties.
He left plenty of wiggle room, acknowledging he would have to determine whether Discovery Plus and HBO Max could be sold in a bundle or even potentially integrated. But he expected the new company’s portfolio to help push it to be a bigger force in the industry. “We want our company to be the place” for creative storytellers, said Zaslav. ‘If we are successful with that, the free cash flow is going to grow.”