David Zaslav Says ‘We’re Not Giving Up on Linear’ in Wake of Ad Revenue Decline, Praises Disney-Charter Deal
Warner Bros. Discovery CEO David Zaslav is “not giving up on linear” as he looks to the future. The executive went as far as to praise Disney’s recent deal with Charter Communications as a good example of how to move forward in the space during the company’s third quarter earnings call amid a growing trend of declining linear ad revenue for major media companies.
“We’re not giving up. We really believe in linear and in fact, there was a lot of noise around the Charter deals with Disney,” Zaslav said during the company’s third quarter earnings call for 2023. “But to Bob’s credit, that was a deal. That deal was structured in a way that’s really favorable for both parties and favorable for the ecosystem.”
Linear advertising decreased 13% in the third quarter for Warner Bros. Discovery, while direct-to-consumer ad revenue increased 29%.
The CEO emphasized on the earnings call that the new deal struck between Disney and Charter, which sees cable subscribers paying a fee for Disney+ and the ability for the company to sell advertising, could pave the way forward for other companies.
“That is likely to help linear in creating a bridge,” Zaslav said. The CEO went on to say that “you can imagine a world” where Max reaches a deal like Disney+ in which the streaming service is offered as an additional benefit to cable subscribers.
“I think it was a very innovative deal by Charter and Disney. Although it started out noisy and scary, I think it created, potentially, a very, very interesting bridge to more scale, lower churn and more stability to linear,” Zaslav said.
Despite Zaslav’s optimism, WBD CFO Gunnar Wiedenfels cautioned that the company can’t predict when ad revenue will turn around.
“While it’s early to be talking about 2024 and beyond, we felt it was prudent to be transparent about what we’re seeing in the market,” CFO Gunnar Wiedenfels said during the earnings call. “We don’t see when this is going to turn, but what we have done over the past 18 months is we put this company into fighting shape. I have no doubt the market is going to come back at some point. When it does, I think we will be able to participate with very significant operating leverage.”
From August 31 to September 11, The Walt Disney Company and Charter Communications had a carriage dispute that resulted in Disney pulling its channels from the cable provider. As part of the deal that was reached between the two companies, Disney Channel, FX, the Nat Geo Channel and ESPN’s full suite was restored while Disney+ and ESPN’s future direct-to-consumer service will be offered to Spectrum TV Select subscribers. Additionally ESPN+ will be offered to Spectrum TV Select Plus subscribers. However, as part of the new agreement, Disney-owned channels Baby TV, Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild and Nat Geo Mundo were removed from the cable provider.
When asked if Warner Bros. Discovery might pull linear channels as part of some future carriage deal as Disney did with Charter, Zaslav was noncommittal, touting the company’s share of cable viewership. “When you think of what is basic cable, it’s us,” he said.
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