Anjali Sundaram | CNBC
The advertising market is currently weaker than at any time during the downturn of the 2020 coronavirus pandemic, Discovery of Warner Bros. chief executive David Zaslav told an investment conference on Tuesday.
If the advertising market doesn’t improve next year, “it will be difficult” to reach the $12 billion profit forecast for 2023, Zaslav said at RBC’s global TIMT conference in New York.
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Zaslav’s comments signal a shift in rhetoric from top traditional media executives who have generally said this summer that advertising declines were not meaningful to them, even as digital media players saw a pullback. Advertisers cut spending as the Federal Reserve raised interest rates to calm inflation, putting pressure on stocks, including media companies.
Things have gotten “much worse” over the past few months, Zaslav said.
Warner Bros. Discovery has seen its valuation cut in half this year. Other businesses that depend on advertising, such as Instantaneous, Meta and BuzzFeedhave all fallen more than 65% this year.
Discovery’s merger with WarnerMedia earlier this year brought a series of unforeseen challenges as some assets were “unexpectedly worse than we thought,” Zaslav said.
HBO went from more than $2 billion in 2019 to a loss of about $3 billion last year as content spending surged, according to Zaslav. The CEO has changed course for HBO Max as it prepares to merge with Discovery+ next year, including eliminating low-rated shows and big-budget movies made just for the streaming service.
“It’s more complicated than we thought, it’s much worse than we thought,” Zaslav said. He added, however, that he did not want to buy a “very well-managed” company because that would have limited the benefits of the merger. Zaslav has cut costs since the deal was struck in April and plans to lay off more than 1,000 additional employees before the end of the year, CNBC reported last month.
Zaslav also said that Warner Bros. Discovery would remain disciplined when talks about renewing NBA rights pick up pace next year.
“We don’t need to have the NBA,” Zaslav said. The company has plenty of sports offerings without it, he added.
Still, Zaslav reiterated that he would like to make a deal with the NBA. He recently renewed star broadcaster Charles Barkley’s contract for 10 years, although the contract includes a clause that Barkley could leave if Warner Bros. Discovery is not renewing its distribution agreement. NBA national television contracts expire after the 2024-25 season.
Any deal with the NBA will need to be forward-looking, Zaslav said, incorporating both the company’s streaming service and sports assets, including Bleacher Report, which reaches younger audiences.
Shares of Warner Bros. Discovery rose more than 3% on Tuesday.
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