When media executive David Zaslav last year took over operational control of the former WarnerMedia as CEO of the upstart Warner Bros. Discovery, he says he found himself with two high-profile money losing operations: streaming service HBO Max and the motion picture group, which includes Warner Bros. Pictures.
Speaking May 18 at the MoffettNathanson’s Inaugural Technology, Media, and Telecom Conference in New York, Zaslav said he was perplexed how a household pay-TV brand such as HBO could go from generating $2.5 billion operating profit from 2015 to 2019, to losing hundreds of millions of dollars.
Zaslav said management also assumed that the streaming services would have another 100 million to 150 million subscribers, and that the biggest challenge would figuring out what to do with upwards of 40% of the “greatest IP in the world.”
In reality, the streaming subscriber base is a fraction of that when excluding HBO pay-TV subscribers.
“It’s hard to run a company successfully when you have a real bleeder, when you have a business that’s losing money and you don’t have your hands around it,” Zaslav said.
The motion picture business went from making money for 25 years for Warner Bros. to “losing lots of money,” he said.
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Fast-forward to the present and the executive said Max generated $50 million in operating income in the first quarter, with the direct-to-consumer business segment set to be profitable a year ahead of schedule. HBO Max will formally change its platform name to Max on May 23.
“Now, we have a DTC business that’s making money,” Zaslav said, adding that to turn around the business, the strategy of releasing original movies on Max had to be stopped. The move to streaming first began in 2021 during the pandemic when shuttered theaters resulted in Warner Bros. releasing its entire theatrical slate concurrently on Max.
“It didn’t reduce [subscriber] churn, didn’t increase subscribers, [and] it also reduced the quality of the product,” Zaslav said. “The quality of the movies done [exclusively for Max] were really not that good. And we’ve would out of that now.”
The highest-profile Max exclusive movie casualty was Warner’s surprising decision to write off its $90 million Batgirl feature, starring Leslie Grace in the title role, with Michael Keaton reprising his Batman role.
“The decision to not release Batgirl reflects our leadership’s strategic shift as it relates to the DC universe and HBO Max,” WBD said in a media statement at the time.
In addition to that controversial move, Zaslav hired James Gunn and Peter Safran as co-CEOs of the revamped DC Comics business unit to help the venerable superhero brand try and emulate the theatrical success of rival Marvel Studios at Disney.
Gunn, who has penned a new “Superman” script, wrote and directed Marvel Studios’ Guardians of the Galaxy Vol. 3, which is currently in theaters.
Zaslav has high hopes for upcoming theatrical releases The Flash, Barbie, Meg 2: The Trench, Blue Beetle, The Nun 2, Dune: Part 2, Wonka and Aquaman and the Lost Kingdom.
The April release of Evil Dead Rise, another scratched Max movie exclusive, which moved to theatrical, has paid off, generating more than $132 million at the global box office thus far.
“I think we’ve made the turn,” Zaslav said. “All of our businesses are making money, with the exception of the motion picture business, but I think we are making that turn now. That’s a big deal.”