Not a great week for the Hollywood rumor mill, right? I think the combination of industry-wide anxieties and some bad trade reporting led to a freak-out in advance of a pretty uneventful Warner Bros. Discovery reveal. No, HBO Max is not shuttering. Or pulling back from international. Or becoming a tile on Discovery+ (though I’m told one name being discussed for the planned combined streaming service is HBO Discovery). Someone actually came up to me at The Grill and asked which outlet I thought would pick up the sure-to-be-dumped Hacks. Really? An Emmy winner? I even heard from an otherwise rational person at Warners who believed the company was 100 percent selling DC, as if that made any sense.
In fact, as I noted in my Batgirl dispatch, the big surprise on Thursday was the increasingly grim financial situation of the combined company as a whole. A $2 billion decline in projected EBITDA for 2023, a worsening outlook for the linear networks, and, of course, that $50-something billion in crushing debt. All entertainment companies are in a weird place right now, caught between the cratering TV business and the Great Netflix Correction. But WBD, despite all its great assets, is in an especially weird place because of its financial situation. Meaning that while Peacock might be losing nearly a half a billion dollars a quarter for Comcast, and Disney’s direct-to-consumer division bled $887 million, those companies haven’t been bought and sold multiple times in the past decade. And they’re offsetting the streaming losses with broadband and theme park profits. WBD is both smaller and more dependent on television/streaming revenue.
An analyst on the Thursday call quixotically asked C.E.O. David Zaslav when HBO might get back to its linear heyday, when it was generating much bigger profits. Given the EBITDA-busting investment in HBO Max over the past few years, the question seemed cute. Now it’s all about boosting that dreary stock price, by any means necessary: As journalist Claire Atkinson pointed out, “In 2016 AT&T agreed to acquire Time Warner for $107 per share. Now $WBD (Time Warner+Discovery) has a share price of $14.59.” Yikes yikes yikes.
My Puck colleague Bill Cohan has a good analysis today of the scary debt situation, and what might happen if the credit rating agencies decide to downgrade. Spoiler: It isn’t pretty. What’s also ugly, and much more urgent for Hollywood people, is that Zaslav and team aren’t nearly done with their “course correction,” as he put it Thursday, as well as the moves needed to achieve all those billion-dollar synergies he’s promised the Street. If the first 100 days of Warner Bros. Discovery were all about setting the executive team and settling on a business and content strategy, the next few months will be about integrating and “right-sizing” the company. That means layoffs. And they start now.
According to several sources, the rolling reductions will begin with smaller groups between Monday and Labor Day, followed by a ramp-up in bloodletting in September and October, with a goal of finishing before Halloween. Marketing, P.R., distribution, the already-impacted sales group, finance, legal, and yes, creative; most departments will be at least touched by the axe, according to one source. The Discovery people, used to the razor-thin staffing of reality TV, continue to be surprised by the level of “bloat” on the Warner side, even after all the AT&T cuts, so the heaviest impact will be suffered there. HBO will gut its unscripted group; Turner and Discovery sports units will be integrated under new leader Luis Silberwasser; engineers and tech backend employees will be redundant; etc. There isn’t a set headcount number—Zaslav and his hooded executioner (C.F.O. Gunnar Wiedenfels) have instead set cost reduction targets. They’re substantial, and the recent lowering of the company’s financial projections amid recession talk has increased the reduction goals, I’m told. The exact timing and plans are being determined by individual business leaders, and I talked to one such leader, who described the reductions as “painful” and “to the bone.” I’m withholding the names of vulnerable people I’ve either confirmed are leaving or heard may be out because most of them are not in powerful positions and some names are in flux.
One name that seems almost certain to exit, although perhaps not imminently, is Walter Hamada, the embattled head of DC. New Warners film chiefs Mike De Luca and Pam Abdy have been making it very known that they want Hamada to stay, even as Kim Masters revealed on Friday that Hamada threatened to quit over the dumpster-tossing of his Batgirl movie and only agreed to remain on through October’s Black Adam. I get why De Luca and Abdy want Walt to stay; he’s got skills and institutional knowledge, yes, but he also currently reports to them, and a new DC leader—assuming Zaslav can find somebody, which is a big if—might negotiate for a direct or dotted line to the C.E.O. Keeping Hamada in place keeps control of the DC slate with De Luca and Abdy.
But Hamada can’t stay, right? He’s a lame duck now that it’s out there that he had one foot out the door over his objection to something Zaslav wanted. Plus, Zaz is telling the world that DC will have an all-new spectacular 10 year plan, conceived with guidance from former Disney maestro Alan Horn himself. Uh… Hamada already has a multi-year DC plan, and he has been executing on it with things like the Batgirl movie. Zaz wants Mike and Pam to be happy, of course, but I’m betting he also wants his own person running DC, one who isn’t tainted by the stink of the previous regime he is so pointedly trashing, and one who can oversee the brand across film, TV, streaming, consumer products and more. And as we’ve seen over and over so far, what Zaz wants is what happens.
None of this upheaval is a surprise, of course. Integrations of companies of this size usually take a year or more, so Zaslav and team are actually ahead of that timeline. And for good reason. The WBD stock is in the dumpster along with that Batgirl movie, Zaz’s compensation is heavily tied to the stock, and he knows he’s got a ticking clock before investors start calling for the whole enchilada to be offloaded to someone else. If that wasn’t the plan all along.