Happy Friday, and welcome back to In The Room, my biweekly private email on the inner workings of the media industry. Tonight, with Warners’ stock down another 17 percent, we take a closer look at Zaz’s merciless cost cutting strategy, the mixed signals he’s sending to creatives, and his unyielding affinity for a linear business in inexorable decline.
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In the earnings call heard round the world, David Zaslav punctured a wound in the entertainment industry’s top-line subscriber-growth fetish. Now he needs to perform the ultimate superhero task: make huge hits while cutting huge costs.
“I don’t really care what the number is,” David Zaslav said on his highly anticipated earnings call earlier this week. The now-embattled-ish Warner Bros. Discovery chief was referring to subscriber numbers for what will soon be, as has long been rumored, a unified HBO Max-Discovery+ streaming service (official name T.B.D.). A year ago, such a statement uttered from the lips of a Hollywood executive would have been blasphemous as Disney and then WarnerMedia and even Paramount+ vied to compete in the subscriber-measuring contest that Netflix routinized for Wall Street. Analysts’ obsession with Netflix, in particular, and top line subscriber growth, in general, had turned the metric into the holy grail. In fact, WBD had put forward a target—130 million by 2025—but Zaz, in a rather dispassionate and cold-hearted fashion, seemed to be disregarding it in order to get back to brass tacks: “We are not in the business of trying to pick up every sub,” he said. “We want to make sure we get paid.”
The number Zaz does care about is EBITDA, which he described as “our financial North Star.” He and his longtime deputy, J.B. Perrette, now hope to see their streaming segment break even in 2024 and generate $1 billion in EBITDA by 2025. “The number on the corner of J.B.’s desk and mine is the breakeven and the $1 billion,” Zaz reiterated later in the call. This is presumably the right note to signal to investors and analysts, who are indeed most interested in knowing how the company intends to...