You may have read about Warner Bros. Discovery and its high-profile CEO, David Zaslav. Often lost or overlooked are the things that matter most to investors. How is the embattled media conglomerate organized, and how can it grow? Can it service its massive debt? Is it a good investment, and what are we to make of Zaslav’s prodigious compensation?
Yes, it’s a difficult time for Hollywood and the TV business. Audiences aren’t going to movie theaters so much, and they’re cutting their cable subscriptions and instead watching Netflix, YouTube, and TikTok—newer companies that are spending tens of billions of dollars building market share and disrupting incumbents like WBD.
In 2018, Zaslav doubled down on reality content and paid $11.9 billion for Scripps, which owned the Food Network, HGTV, and the Travel Channel. Some analysts were skeptical, as linear television was morphing from a dual-revenue-stream cash cow to a declining business. Early in 2021, Zaslav reached out to AT&T CEO John Stankey, and a year later a deal was struck to merge Discovery with AT&T’s WarnerMedia business for $43 billion.
Zaslav has put WBD assets into three buckets: networks, which has cable TV operations including CNN, the Food Network, Discovery, and TBS; studios, mostly Warner Brothers; and direct-to-consumer, which has Max and includes HBO. Max was just rolled out this past April, so it’s still in its early days, and while revenue grew 14% in the quarter to $2.7 billion, the business lost $3 million in Ebitda, mostly from start-up costs. Perrette thinks this business could have a 20% margin—at some point. “I’m not saying next year, but over time,” he says.
If Max ends up not making enough money, Fitch says WBD can focus on distributing content theatrically on its networks and to the likes of Netflix and Amazon—all of which it already does, reversing a streaming-only orthodoxy from the AT&T era. A positive is that the average cost of the debt is 4.6%, with an average maturity of more than 14 years. Most analysts believe that barring some sort of catastrophe, the company can handle the debt load.
In fact, any way you cut it, Zaslav has been paid a serious amount of money since Discovery went public in 2008. According to Equilar, which tracks corporate leadership data, Zaslav’s total realized pay , which includes base salary, bonuses, stocks that vested and options exercised, and the value of all other compensation within the given fiscal year, is $825,794,276 since Discovery’s IPO 15 years ago, making his average annual pay at just over $55 million.
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Source: MarketWatch - 🏆 3. / 97 Read more »
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