Greetings from Los Angeles, where I’m recovering from a very enjoyable weekend in Washington. For those interested in a WHCD postgame report, Peter and I debriefed about the festivities on the latest episode of The Powers That Be. We also swapped some final thoughts on the Biden-Times tiff I wrote about last week. (Listen here.) Next up, the Milken Conference, which kicks off May 5 here in L.A. If you’re heading west and want to get together on the periphery, please don’t hesitate to reach out (just reply to this email).

In tonight’s issue, news and notes on David Zaslav’s NBA quagmire, the latest in a series of unforced errors on the WBD C.E.O.’s long and winding road to further debt reduction and the inevitable next merger. Plus, a little color from Porter House.

But first…

💨 A B.I. change: Axel Springer is planning to part ways with Business Insider editor-in-chief Nich Carlson in the coming months, a move first reported by Semafor that I’ve since confirmed with sources familiar with the matter. In fact, I’m told Axel C.E.O. Mathias Döpfner and U.S. leader Jan Bayer have been planning to replace Carlson since last fall, when they restored the entity’s original name (from Insider) and its focus on business and financial news (as opposed to more general-interest fare). The Bill Ackman contretemps may have confirmed their decision—Semafor reported that Döpfner had pushed to remove Carlson amid the controversy—but the true impetus for the management change likely has more to do with Axel’s broader ambitions: Döpfner and Bayer want B.I. to be as formidable in the business space as their flagship entity Politico is in politics. Remember, Axel once coveted the FT.

In some ways, Carlson’s exit will herald the end of an era. The protégé of Business Insider founder Henry Blodget, he enjoyed an exalted and rapid rise at the company—from viral O.G. slideshow purveyor to Marissa Mayer chronicler to, eventually, editor-in-chief. He helped operationalize Blodget’s revenue-focused priorities and earned himself a handsome seven-figure comp along the way. At the same time, his lack of outside credentials inevitably impeded B.I.’s prospects. On some level, the place never quite graduated to the adult’s table of American journalism—it hoovered up people who’d been laid off elsewhere and seemed hyperfocused on nails-on-the-chalkboard cancellation jobs. And the Ackman series, whatever its merits, had a startlingly unsophisticated tone. (Reached for comment, Carlson referred me to a B.I. spokesperson, who issued the following statement: “Nich Carlson has built an award-winning newsroom, and he is tremendously valued by Business Insider.”)

In any event, Carlson’s departure will allow Bayer the opportunity to hire a more senior newsroom leader to match BI’s potential with Axel’s capital. Former Journal editor Matt Murray is on the market. I assume he’ll be getting a call.

🍽️ The man who came to dinner: Over at The Stratosphere, Teddy Schleifer reports that Rupert Murdoch attended a secret dinner party convened by Elon Musk and David Sacks to discuss how to raise money to beat back the Democrats in November. “It wasn’t an explicitly pro-Trump gathering,” says Teddy, who broke the news of the dinner. Nevertheless, given Elon and Sacks’ politics, one imagines it came close to that—and, certainly, one wonders how Murdoch feels about Trump these days, and how that might influence the coverage over at Fox. Meanwhile, other guests included Michael Milken, Peter Thiel, Steven Mnuchin, and Travis Kalanick, among others. “All were there as members of a burgeoning anti-Biden brain trust,” Teddy writes, “united by a shared sense of grievance.”

One year earlier, of course, Lemon had been very inelegantly defenestrated from CNN, ostensibly because of some controversial on-air remarks, but more accurately because of his then-boss Chris Licht’s inability to manage him. Also, Zaz and his mentor John Malone had grown frustrated with Lemon’s outspoken and polarizing personal brand. The ouster effectively ended Zaz and Lemon’s friendship, such as it was. Since then, the two men had met just once, for breakfast at Barney Greengrass, and exchanged bland pleasantries during run-ins at the Polo Bar and in the Hamptons.

The postnuptial Porter House encounter struck Zaz as an opportune moment to extend an olive branch. Summoning the waiter, he sent Lemon’s table a bottle of 2017 Opus One, a purplish Cabernet blend (black cassis, black cherry, a touch of cocoa) that cost $1,600, plus tax. The gesture, which at least earned Zaslav & Co. a tableside visit from the old CNN star, inarguably illustrated some of the finer points of Zaz’s character: He is an operator, a diplomat, and, fundamentally, someone who believes in money’s power to make problems go away, or at least paper over past mistakes.

Alas, Zaslav’s tenure at Warner Bros. Discovery has been largely defined by this kind of brazen financial choreography. Since merging WarnerMedia and Discovery two years ago, Zaslav and his leadership team have embarked on an aggressive cost-cutting mission that has reduced WBD’s debt from $55 billion on day one to about $40 billion today—all in anticipation of further consolidation just years or even months down the line. In the process, he has enacted controversial strategic changes that have pushed people out of work, pissed off the creative community, and sapped storied brands like HBO and CNN of their esprit de corps. Most notably, he has repeatedly missed his EBITDA targets and driven the value of the company down by nearly 70 percent.

At most other companies, such a cataclysmic performance would presumably result in a swift termination, or at least invite scrutiny from the board. Instead, WBD tweaked Zaz’s contract to link his compensation to free cash flow, and in 2023 he netted $49.7 million. To most observers, these financial tactics make him the perfect avatar for bumbling, destructive corporate greed. To others, he is the exemplar of a ruthless, Welchian business savvy. And yet, even the most charitable view of Zaz’s stewardship can’t negate the litany of very costly unforced errors he’s made along the way.

This week, after the Opus hit the corporate card, WBD shareholders were alerted to a far more significant potential mistake. For months, Disney and WBD had been in exclusive talks with the NBA to renew their broadcast rights. ESPN chief Jimmy Pitaro had exited the window with a handshake deal for the “A package” of games, including the Finals. Not so Zaz: On Monday, the Journal reported that Brian Roberts’ NBCUniversal had bid a staggering $2.5 billion a year for the “B package.” (Amazon and the league have also agreed to a framework for a third package). If Zaz wanted to hold on to the rights, a borderline necessity to backstop WBD’s cable business, he’d need to pay out the nose—more than $2.5 billion, to be sure, of the $41 billion the company made last year. Meanwhile, the WBD stock hurtled down another 9 percent.

On some level, this may have been a crisis of Zaz’s own making. In 2022, less than two years before the rights-renewal window, he had memorably announced, “We don’t have to have the NBA.” It was a risky bluff, given that WBD does not have NFL rights, and that NBA on TNT is the asset that sustains the Turner business. (No, the baseball and hockey and March Madness rights are not remotely comparable.) NBA commissioner Adam Silver apparently took Zaz at his word and took the pitch from Roberts and NBCU media chairman (and Turner alum) Mark Lazarus. Recall that Roberts is quite fond of instigating these eleventh-hour bidding wars, sometimes merely to drive up the price for his rivals (see: 21st Century Fox). Still, Zaz’s inability to anticipate this very predictable scenario is a failure in and of itself, and presages a tense tenor to future negotiations around a potential WBD-NBCU combination.

On Monday, the Journal revealed the details of the NBC bid, birthing a thousand “Roundball Rock” reminiscences and sending WBD Sports chairman Luis Silberwasser scrambling to clean up the mess. On Tuesday, Zaz appeared courtside at the Garden for the Knicks-76ers game, alongside none other than David Geffen and Lloyd Blankfein—a gesture, not unlike the Opus gift, that was presumably intended to telegraph a desire to atone and make amends. (Grant Hill noted on-air the appearance of his boss.)

Arguably, a little foresight might have precluded the need for such gestures. Pitaro’s $2.6 billion-a-year “A package” renewal is a veritable bargain, and also a necessity for the business given both its D.T.C. manifest destiny and Spulu preoccupations. Zaz likely could have arrived at a similar pro rata deal for the “B package” that locked the annual price tag in somewhere around $2.2 billion or $2.3 billion. Instead, he put himself in the unenviable, damned-if-you-do, damned-if-you-don’t position of either losing his NBA rights to NBC, or being forced to outbid Roberts, which will inevitably trim the profit margin gained through affiliate fees and ad sales.

Indeed, it’s even conceivable he could win the rights at such an inflated price that WBD ends up losing money in the out years of the deal. Alternatively, should he lose the rights, Zaz will trigger a contract provision allowing for another potentially humiliating scenario in which Charles Barkley—and, presumably, other NBA on TNT anchors—can leave the network (and perhaps move en masse to NBC). Of course, losing the NBA would at least have the benefit of opening up $20 billion to $25 billion in additional free cash flow for Zaz and WBD over the next decade.

But therein lies the dilemma: Future free cash flow may yield a hefty comp, but it isn’t a growth strategy without indications of future revenue acceleration, and it obviously yields little to no equity value. And servicing the debt in anticipation of a future sale or merger only works so long as you don’t cut so close to the bone that you neuter the value of the asset itself. Of course, this is the company that Zaz himself wanted to create. Two years into the experiment, he’s still the one who gets to figure out how to fix it.