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Discovery Needs to ‘Earn the Trust and Respect’ of WarnerMedia Team, Zaslav Says

Discovery CEO David Zaslav, one month after the blockbuster announcement with AT&T of the deal to merge his company with WarnerMedia, acknowledged that he still has work to do to win hearts and minds of the people he expects to bring under one big content umbrella in 2022.

“We’re going to have to earn the trust and respect of the full Warner team,” said Zaslav, speaking Tuesday at Credit Suisse’s 23rd Annual Communications Conference.

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He added, “There’s a lot that we don’t know that the Warner team is the best in the world at.”

Zaslav, who would head up the combined WarnerMedia-Discovery once the deal closes, made a point of calling out the nearly 100-year legacy of Warner Bros., praising the studio as “the greatest creative company in the world.”

Under the Discovery and AT&T agreement, WarnerMedia assets including HBO Max, Turner and Warner Bros. will be combined with Discovery’s portfolio of domestic and international cable channels, including Discovery, TLC, Animal Planet, OWN, Food Network and HGTV. The deal for the new company, which will be called Warner Bros. Discovery, is expected close in mid-2022. AT&T will get $43 billion in cash from the WarnerMedia spinoff.

The new Warner Bros. Discovery will have unique advantages compared with global streaming leaders Netflix and Disney, according to Zaslav, in that it will combine news, sports and nonfiction TV programming with world-class scripted entertainment.

“We will be singularly focused” on content, Zaslav said, adding that the new company “starts with the motion picture business.” Warner Bros. also has the greatest TV library in the world, he said. “At NBC we used to say ‘Must See TV,’ but Jack Welch said, ‘Warner Bros. TV’ because all those shows were from Warner Bros.,” Zaslav said.

Zaslav boasted of the massive trove of intellectual property owned by Warner Bros., HBO and DC, spanning “Game of Thrones,” “Mare of Easttown” and the “Harry Potter” and “The Lord of the Rings” film franchises. He quipped, “I can spend the first 20 minutes [of a presentation] pressing a button putting up exceptional, top-of-the-pyramid IP.”

There’s some uncertainty over which execs will stay — and which will go — under the merged Warner Bros. Discovery. Jason Kilar, currently CEO of WarnerMedia, has told employees he expects to stay on into 2022, signaling that he may be looking to exit after the merger is completed.

Post-close, Zaslav said at the Credit Suisse conference, “My job is to make this company the place everyone wants to come… I’m not trying to sell anything.” He added, “We’re not [content] buyers at this company. This company is going to be creative makers.”

Zaslav acknowledged that Warner Bros. Discovery still needs to determine out how to combine their streaming services on a go-to-market basis. He wouldn’t bite on the question from Credit Suisse analyst Doug Mitchelson about whether HBO Max at $15 per month was already too expensive to combine with Discovery Plus in the U.S. market.

However, Zaslav did call out the success he says Discovery is having with its ad-supported streaming package. He claimed the company is making $6 per month in ad revenue per subscriber for the version of Discovery Plus with ads (which has a $5 monthly subscription fee). That’s a monthly ARPU of $11 versus about $7 on cable subs, according to Zaslav. Neither Disney Plus nor Netflix carries commercials, he pointed out.

Discovery hasn’t completed its upfront selling season with ad buyers, Zaslav said, but he claimed this year’s upfront is coming in up more than 20% across the industry, “more than I have seen in my lifetime.” Even though TV viewing numbers are down, ad rates are rising because, he said, “you have more dollars chasing more scarcity.”

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