Zaslav’s Hatchet Man Makes His Move   

Gunnar Wiedenfels
Photo by Sven Hoppe via Getty Images
Matthew Belloni
April 28, 2022

Is Gunnar coming for you? How about you? I couldn’t help but envision bullseyes as I watched Warner Bros. go to extravagant lengths to show off its extravagant superhero films to the movie theater people on Tuesday here in Las Vegas. It was the same day, coincidentally, that Warner Bros. Discovery, the new parent company, revealed its quarterly earnings in New York, during which its leader, David Zaslav, preached extreme fiscal discipline and promised not to win the content spending war. Conflicting messages, to be sure. 

Or are they? This is where we are: Since the Great Netflix Correction of last week, everyone in Hollywood wants the creative community to feel secure that the freewheeling film and TV spending will continue, while at the same time telling Wall Street that it won’t. Can we have both? We’re gonna see very soon.  

For instance, since Zaslav took over, the debate at Warner Bros. Discovery has been over where his promised $3 billion in cuts will materialize. He says it won’t impact content spend, and that there’s low-hanging fruit, like the thousands of backend jobs duplicated when Volkswagen buys Porsche—or, in this case, when a leading unscripted television conglomerate merges with a premium film and scripted TV company. And, of course, there’s CNN+, an easy $400 million fix. But what else? Redundancies alone won’t solve the fiscal problem. Thus, a more complicated and anxiety-inducing question: where will Zaslav choose to spend and where will he not?

To that end, Gunnar Wiedenfels, Zaz’s C.F.O. and lead hatchet man, is starting to drop hints. On Tuesday, the 44-year old German (it’s pronounced “Goo-nahr”) took aim at previous management under AT&T, and WarnerMedia C.E.O. Jason Kilar, saying they made “chunky investments” that are “lacking a solid financial foundation.” Shots fired, and Kilar was pretty upset, as he has been at the suggestion that Discovery was somehow unaware about how expensive CNN+ would be. 

Gunnar didn’t clarify what he meant, and he declined to talk to me for this column, but I heard from several sources at the company this week, and the picture is becoming clearer. Publicists will deny it, but yes, scripted originals are all but D.O.A. at TBS, TNT and the other Turner networks. With new development “paused,” it’s only a matter of time before the rest of the slate is wiped clean there.

Further, I’m told the film group’s move to make a slate of straight-to-HBO Max movies is now on the chopping block. That was a big, expensive mission for Kilar, who believed that to become a true Netflix competitor, Warners had to prioritize the streamer for all content, including most movies. Until two weeks ago, everyone sort of assumed that if Netflix was doing it, whatever it is must be good. Now? Not so much. “The apparent singular goal of the prior WarnerMedia leadership to drive HBO Max subscribers at all costs is being challenged by new ownership,” the analyst Michael Nathanson told me yesterday. Instead, the Zaslav team is “focused on driving free cash flow and return on investment.” 

And for movies, the R.O.I. is probably greater with making fewer movies and targeting them for theatrical distribution. That’s especially true if, as I wrote last week, the new 45 day theatrical window doesn’t hurt consumption or subscribers on Max, and might even help boost them. For instance, I’m told early viewership of The Batman has been about the same as Dune, which was a day-and-date title. Batman is obviously bigger I.P., but that film also grossed $760 million (and counting) in theaters, while Dune topped out at $400 million without that exclusive theatrical window. Zaslav sees free cash flow being gobbled up by a sandworm (not to mention one very pissed-off filmmaker in Denis Villeneuve), and Zaz is said to be highly focused on finding the right production and windowing strategy for films. So major cuts there don’t seem imminent.   

What does seem vulnerable is all the kids content that Kilar pushed onto HBO Max in recent years. DC and other brands were leveraged into a pretty robust offering, at least according to my 6-year-old’s iPad history. But again, what’s the R.O.I. on that stuff? Is HBO Max actually competing with Disney or Netflix there? And at what cost? That’s being debated internally right now, and I think we will see either less kids content or a more coherent approach to it.

To that end, Gunnar has been in L.A. over the past couple weeks, meeting with various executives and asking, like the Bobs in Office Space, what it is they dooooo, exactly. A source in one such meeting described Wiedenfels as “relentless” in probing the reasons behind various expenses and decision-making. This source felt like he was interviewing for his own job and trying to justify himself. Another source said there’s a black-or-white nature to Gunnar’s questions. Basically, do we need it? “For him, it’s not about the bottom line, it’s about winning,” David Leavy, the company’s chief corporate operating officer, told me today. “It’s about what helps us on screen and what doesn’t.”

That blunt approach has helped Gunnar thrive within Discovery since he joined from ProSieben in 2017. He executed the Scripps acquisition and is said to have found $1 billion in savings when the company only expected $350 million. Zaslav fell in love, but unscripted producers absolutely hate him. For a year now, I’ve heard story after story of reality series whose productions were squeezed by Discovery. Big stars, too. Or at least big for Discovery. The M.O. is that Zaslav plays the magnanimous supporter, then either Gunnar, or networks chief Kathleen Finch, or dealmaker Bruce Campbell, drops the hammer. A few episodes cut here, a location trip eliminated there. Gunnar was behind that incredibly unpopular shift a few years ago to make producers take out loans to fund their own shows. That kind of crap. And in more than a few talent standoffs, Discover simply says “best offer” and waits for a pass or a begrudging acceptance.  

This part isn’t news, of course. Zaslav knew that was his reputation, hence the months-long “listening tour” to generate goodwill and show he knows that Hollywood is different from the smelly trenches of reality TV. And nobody cared about Gunnar when he was being cheap with no-name “stars.” Now, he’s getting his own reputation.

That’s because the Discovery people, while saying all the right things publicly, are also experiencing sticker shock at the costs and spending involved in the Warner Bros. and HBO businesses. Remember, they’ve never dealt with major talent or unions before. It would be easy to see why a $1 million premiere party or a $10 million awards campaign might not deliver a tangible R.O.I., until you try to keep Jesse Armstrong or The Rock or Kate Winslet from doing their next project at Apple.    

So while Zaz and Gunnar both insist they aren’t looking to reduce the content spend, which stands at $23 billion this year, more than the $20 billion Netflix says it will spend (though Netflix doesn’t have sports or news), they absolutely do need to cut somewhere. That’s a fiscal reality. As my Puck colleague William Cohan has analyzed, Zaz has watched his stock price crater since this deal was announced. He’s got $55 billion of debt, and has promised to deliver the $14 billion of EBITDA. Scary stuff.

But with Netflix laying people off and questioning its entire business model (more on that Sunday), it would seem like Warner Bros. Discovery is in a better place today than it was even a couple weeks ago. Indeed, more than a few people I’ve met with this week at Cinemacon have marveled at the recent reversal of thinking: that movie theaters, linear TV networks and their recurring revenue streams, are suddenly cool, along with a growing streaming service. In many ways, Zaslav and Gunnar are on a roll. Until the cuts and layoffs begin.