Warner Bros. Discovery CEO David Zaslav again downplayed in the importance of sports to his company Wednesday.
“We’re less and less dependent on sport,” Zaslav said at the Goldman Sachs Communacopia and Technology Conference on Thursday. “I think the more we can be dependent on our IP — when we launch ‘Harry Potter,’ it’s ours; when we launch ‘Lord of the Rings,’ it’s ours. We just did ‘Conjuring,’ there’s going to be a ‘Conjuring’ series on HBO, it’s ours, and I think that’s a big differentiator in terms of our ability to capture margin and growth because no one’s going to come back four years later, like in sport, and say, ‘Okay, we need more for ‘Conjuring,’’ or, ‘We need more for ‘Batman’ and ‘Superman’’ because it’s doing so much better.”
Zaslav also said that he expects the split of WBD into two publicly traded companies to take place sometime in April next year. He added that there are no regulatory approvals required and that the team is working very hard on obtaining certified financials to enact the self-funding transaction.
Gunnar Wiedenfels, who currently serves as CFO of Warner Bros. Discovery, will be leading the newly created Discovery Networks business that will consist of brands such as TNT Sports, CNN and Discovery. The company is currently developing an app for TNT Sports that will be available as a streaming product and bundle option as the content departs the HBO Max platform.
Zaslav seemed to suggest that the stake Discovery will have in Warner Bros. could be less than the 20% Wiedenfels has previously mentioned. “Some or all of that might get sold before we split, but the intention is that that would be short term and that that would be a meaningfully de-levering event for global networks to give even more acceleration to a business that has very good free cash flow metrics, and the overwhelming amount of debt will be going over to there.”
Wiedenfels recently shared that sports is a key part of the strategy for Discovery Global and that the company will continue looking at properties that come to market while remaining disciplined in the space. When asked about potential opportunities for the new company, Zaslav suggested that it could buy some additional, “low multiple assets” on top of those it already owns.
The merger of WarnerMedia and Discovery in 2022 created over $50 billion in legacy debt, and Zaslav said that the company has paid $20 billion of the debt down. Zaslav said the company is “in a really formidable position” ahead of its split.
“Right now, there’s only five global players,” Zaslav said. “There’s Amazon, Netflix, Disney, us and YouTube, which is a slightly different business, but a very strong company and very powerful. Maybe that’ll be six, maybe it’ll be seven, but it’s not going to be 20, and you start to see the challenge of being a local player, and it’s one of the reasons why you see us market by market starting to bundle.”
Zaslav outlined a link between the advertising market and the type of content that is being disseminated into the marketplace. Over the last year or two, he estimates that sports has picked up and been an advantage in the company’s quest to sell advertising surrounding its programming. TNT Sports started offering its lineup of live game broadcasts as an add-on subscription within Max in October 2023, but the company modified its strategy this past spring by offering games in the standard and premium tiers of the streaming platform.
“Sports is super strong, and it’s pretty strong globally — particularly in the U.S., it’s really strong, and we’ve taken on a lot more sport,” Zaslav said. “We did that, I think, that (1) because we were able to get it for a good price, and we walked away from the NBA and were able to replace it with a lot of good stuff. We recently picked up one of the semifinals for College Football playoffs, but things like March Madness and the Big 12, baseball playoffs are sold out, and so we’re doing quite well.”
Though Zaslav characterized WBD as having ‘walked away’ from the NBA, it should be noted that the company filed suit to maintain the rights, ultimately culminating in a settlement that will pay the company $70 million/year over the next five years.
