The advertising market is currently weaker than ever during the 2020 coronavirus pandemic slowdown, Warner Bros. Discovery That said CEO David Zaslav on Tuesday at an investment conference.
If the advertising market doesn’t improve next year, “it’s going to be tough” to meet the company’s $12 billion 2023 earnings forecast, Zaslav said at RBC’s Global TIMT Conference in New York.
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Zaslav’s comments signal a change in the rhetoric of major traditional media executives who this summer generally said advertising slumps weren’t significant to them, even as digital media players saw a downturn. Advertisers cut their spending as the Federal Reserve raised interest rates to cool inflation, putting stocks, including media companies, under pressure.
It has gotten “much worse” in recent months, Zaslav said.
The rating of Warner Bros. Discovery has halved this year. Other businesses that rely on advertising, such as snap, meta and BuzzFeedare all down more than 65% this year.
The merger of Discovery with WarnerMedia earlier this year brought a series of unforeseen challenges, as some assets were “unexpectedly worse than we thought,” Zaslav said.
According to Zaslav, HBO went from a profit of more than $2 billion in 2019 to a loss of about $3 billion last year as content spending surged. The CEO has changed course for HBO Max as it will merge with Discovery+ next year, including eliminating lower-rated shows and bigger-budget movies made just for the streaming service.
“It’s messier than we thought, it’s much worse than we thought,” said Zaslav. However, he added that he didn’t want to buy a company “that was really well run” because it would have limited the benefits of the merger. Zaslav has cut costs since the deal closed in April and plans to lay off more than 1,000 additional workers before the end of the year, TBEN reported last month.
Zaslav also said that Warner Bros. Discovery would remain disciplined as NBA rights renewal talks accelerate next year.
“We don’t need to have the NBA,” said Zaslav. The company has many sports offerings without it, he added.
Still, Zaslav reiterated that he would like to sign a deal with the NBA. He recently extended the contract of star broadcaster Charles Barkley for 10 years, although the contract includes a clause that allows Barkley to leave as Warner Bros. Discovery does not renew its contract of carriage. The NBA’s national TV contracts expire after the 2024–25 season.
Any NBA deal should be forward-looking, Zaslav said, and include both the streaming service and the company’s sports assets, including Bleacher Report, that reach younger audiences.
The shares of Warner Bros. Discovery fell more than 1% on Tuesday.
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