Warner Bros. Discovery, owner of CNN, HBO Max, TLC and Food Network, is mounting an aggressive cost-cutting plan ahead of its promise to find more than $3 billion in savings in 2023.
CEO David Zaslav has wasted no time since the $43 billion merger between Discovery and WarnerMedia closed in April. According to The Hollywood Reporter, senior leaders in the company’s US-based advertising division were informed that buyouts will be coming, although they haven’t been offered yet.
News of the cuts, which will slash approximately 30% of the firm’s ad sales team, or about 1,000 jobs, was first reported by The Information on Tuesday.
The moves are fairly typical of any merger that involves duplicative divisions. In the case of Warner Bros. Discovery, however, Zaslav has underscored that the media giant’s ultimate goal is to spend more money on TV shows, while slashing costs of projects with inflated budgets.
Case in point: The CEO recently nixed J.J. Abrams’ $200 million-plus sci-fi drama “Demimonde,” starring “Station Eleven” actress Danielle Deadwyler. He also famously killed CNN+, CNN’s month-old streaming service, after the company spent $300 million to develop it and hired hundreds of people.
Those kinds of efficient moves by Zaslav, known for his favored uniform of a fleece vest over a button-down shirt, has so far pleased the Wall Street crowd.
Cowen analyst Doug Creutz raved about the cost cutting in a June 15 report, writing that the newly combined firm is “moving rapidly to capture synergies.”
“We fully expect the company to achieve its cost synergy targets; the main question is whether it can do so without causing too much disruption to the Warner culture or the content pipeline,” Creuz said, maintaining his “outperform” rating on Warner Bros. Discovery with a $24 price target.
The company’s “valuation looks even more attractive,” he added.
Since taking the helm, Zaslav has also removed layers of executives so that he has more direct reports. The move has resulted in many WarnerMedia execs heading for the door, and panic among employees who are waiting for the other shoe to drop.
But Wells Fargo analyst Steven Cahall acknowledged the chaotic nature of melding two companies, adding that the bumpy ride will smooth out in the long-term.
“Mega-mergers are never easy given departures, culture clashes and reorganizations, so trying to grow and deleverage while becoming ‘one company’ is a lot to swallow,” Cahall wrote in a June 1 report. “We think Warner Bros. Discovery is a great opportunity for patient investors given excellent content assets and a management track record of merger execution. Near term, it’s a lot of noise.”