Warner Bros. Discovery is up for sale. Why CEO David Zaslav isn't ready to give up the reins

Paramount Chairman David Ellison’s latest connection to bargain Warner Bros. Discovery contained a twist: Should Paramount, backed by tech billionaire Larry Ellison, propulsion disconnected the purchase, Warner Bros. Discovery Chief Executive David Zaslav could enactment connected to assistance pb the combined enterprise.

“They’re sweetening the pot,” Paul Hardart, a prof astatine New York University’s Stern School of Business, said of the Ellison family. “It conscionable shows each the small arrows successful their quiver they’re utilizing to effort to propulsion this deal.”

David Ellison’ unexpected olive subdivision to Zaslav was contained successful a missive this period to Warner Bros. Discovery’s committee that offered $58 cardinal successful currency and banal for the full company. The determination underscores the family’s determination to triumph the amusement institution that includes HBO, CNN and Warner Bros. movie and tv studios — and an obstacle successful their path.

After hustling for decades to get to the large stage, Zaslav, 65, isn’t acceptable to relinquish the reins. He’s anxious to beryllium critics incorrect and implicit a turnaround aft 3 achy years of setbacks and outgo cuts to trim the company’s upland of debt.

Warner Bros. Discovery committee members, including Zaslav, person unanimously voted to cull Paramount’s 3 bids, viewing them arsenic excessively debased and not successful the champion involvement of shareholders, according to 2 radical adjacent to the institution who were not authorized to comment.

The committee supports Zaslav’s tendency to forge up with a planned divided of the institution adjacent spring. But it besides has opened the auction to different imaginable suitors, which is expected to pb to the steadfast changing hands for the 3rd clip successful a decade.

Representatives of Zaslav, Warner Bros. Discovery and Paramount declined to comment.

David Ellison’s audacious connection is being guaranteed by his father, Larry Ellison, the world’s 2nd richest antheral with a nett worthy that exceeds $340 billion. The Ellisons’ connection includes paying 80% currency to Warner shareholders and the remainder successful stock, according to 2 radical acquainted with the substance who weren’t authorized to comment. The astir caller connection was $23.50 a share.

The Ellisons began their run past month, conscionable weeks aft David Ellison’s Skydance Media, on with RedBird Capital Partners, picked up the keys to Paramount, which includes CBS, MTV, Nickelodeon and the Melrose Avenue movie studio, which has been depleted by decades of underinvestment.

Since then, the 42-year-old Ellison has led Paramount connected a buying bonanza, paying $7.7 cardinal for UFC media rights and $1.25 cardinal implicit 5 years to Matt Stone and Trey Parker to proceed creating their cartoon “South Park.” It besides wooed Matt and Ross Duffer, the duo down “Stranger Things,” distant from Netflix with an exclusive four-year deal. This week, it announced a planned East Coast expansion, signing a 10-year lease for a movie and TV accumulation halfway nether operation successful New Jersey.

The projected summation of the much vibrant Warner Bros. would springiness the Ellisons an unparalleled amusement portfolio with DC Comics including Superman, “Top Gun,” Scooby-Doo, Harry Potter, “The Matrix” and “The Gilded Age.”

The household would power streaming services HBO Max and Paramount+, astir 3 twelve cablegram channels, including HGTV, Food Network and TBS, and 2 bequest quality operations — CNN and CBS News.

It would besides accelerate the inclination of uber billionaires, including Amazon’s Jeff Bezos and SpaceX’s Elon Musk, of owning salient news, amusement and societal media platforms. Larry Ellison besides is portion of a U.S.-based consortium lined up by President Trump to bargain TikTok from its Chinese owners.

“If a commercialized woody with China is imminent, and TikTok would beryllium aligned, past it would make a caller media colossus, the likes of which we haven’t seen,” said seasoned enforcement Jonathan Miller, main enforcement of the concern steadfast Integrated Media Co.

Paramount is successful talks to merge with Warner Bros. Discovery.

(Al Seib / Los Angeles Times; Dania Maxwell / Los Angeles Times)

The play is unfolding arsenic Paramount connected Wednesday slashed 1,000 workers successful the archetypal circular of cuts since Ellison took over. A 2nd question of layoffs — affecting different 1,000 workers — is expected successful the coming weeks, helping fulfill a committedness made to Wall Street by Ellison and Redbird to trim expenses by much than $2 billion.

Combining with Warner Bros. would bring much layoffs, analysts said, and a imaginable hollowing retired of a historical studio.

“Merger aft merger successful the media manufacture has harmed workers, diminished contention and escaped speech, and wasted hundreds of billions of dollars amended invested successful integrated growth,” the Writers Guild of America West, said past week successful a connection successful absorption to the projected unification. “Combining Warner Bros. with Paramount oregon different large workplace oregon streamer would beryllium a catastrophe for writers, for consumers, and for competition.”

Critics constituent to a agelong database of media merger misfires, including the disastrous AOL Time Warner merger a 4th period ago. Some critics contend Walt Disney Co.’s $71-billion acquisition of overmuch of Rupert Murdoch’s amusement holdings didn’t unrecorded up to expectations, and AT&T whiffed its $85-billion woody for Time Warner, handing it to Zaslav’s Discovery 4 years aboriginal for $43 billion.

The New York native, a descendant of Jewish immigrants from Poland and Ukraine, had spent 16 years moving the Discovery cablegram transmission group, a respectable business, but 1 that lacked Hollywood flash.

Zaslav grew up connected the fringe of New York City, successful Ramapo, N.Y., wherever he’d been a promising tennis subordinate who proudly wore his diversion cogwheel to mediate school. Tennis was his individuality — until helium started getting bushed by players helium utilized to whip.

Zaslav’s manager sat him down, bluntly saying helium wasn’t putting successful the work.

“I vowed that time I would ne'er beryllium outworked again,” Zaslav said during a 2023 commencement code to Boston University graduates. Underlings person agelong marveled astatine his indefatigable enactment ethic.

The code was meant to beryllium his triumphant instrumentality to his alma mater. Zaslav had yet made it to Hollywood, wherever helium was present holding tribunal successful an exquisite country bureau that had belonged to workplace laminitis Jack Warner.

Zaslav had large plans to crook astir Warner Bros. But, successful Boston, helium suffered a beatdown.

The Writers Guild of America had conscionable gone connected onslaught against his and different Hollywood studios. Protesters heckled Zaslav. Students booed. A level flew overhead, waving a banner that read: “David Zaslav Pay Your Writers.”

He had assumed power a twelvemonth earlier, successful April 2022, conscionable arsenic Wall Street soured connected media companies that were spending wildly to physique streaming services to vie with Netflix.

Zaslav inherited a task bleeding billions of dollars to get into streaming. The merger itself saddled the institution with $55 cardinal of debt. Warner’s banal plummeted.

He and his squad spent the archetypal fewer years slashing divisions, canceling TV programs and contracts, and shelving movies. To further trim expenses, the institution laid disconnected thousands of workers. Hollywood soon viewed Zaslav with derision.

It didn’t assistance that Zaslav has agelong been 1 of the astir handsomely compensated executives successful America.

There were high-profile stumbles, including jettisoning unit of the tiny Turner Classic Movies transmission and an ill-conceived rebrand of its streamer to “Max” earlier changing the sanction backmost to HBO Max.

“The Warner Bros. Discovery merger was a well-intended failure,” Hardart said. “The cablegram subscriber basal shrank astatine a faster complaint than astir radical had forecast. ... Thousands person mislaid their jobs, the HBO marque has been reimagined and reimagined, films person been mothballed and the aboriginal of the Warner Bros. workplace is contiguous uncertain.”

Warner Bros. Discovery paid down $20 cardinal successful debt, but $35 cardinal remains. The indebtedness load has astir suffocated the company, making it a susceptible target.

“There was a batch of fixing that David Zaslav and his squad had to do,” Bank of America media expert Jessica Reif Ehrlich said successful a caller interview. “It’s been 3 years of incredibly dense lifting — but that’s beauteous overmuch done now.”

In a enactment to investors past week, Ehrlich wrote Warner’s beardown franchises, including DC Comics, and its voluminous room marque it “an highly charismatic imaginable acquisition target,” 1 that could fetch $30 a share. Her steadfast carries a “buy” standing connected the stock.

Warner Bros. Discovery Chief Executive David Zaslav and AT&T Chief Executive John Stankey shingle hands connected May 17, 2021, successful New York City.

(Preston Bradford / Discovery)

Last summer, Zaslav announced plans to divided the institution successful 2 halves.

Zaslav would tally Warner Bros., which would dwell of the Burbank studios, HBO and the HBO Max streaming service. Longtime lieutenant Gunnar Wiedenfels would helm Discovery Global, made up of the firm’s planetary businesses and basal cablegram channels, which look an uncertain aboriginal successful the streaming era.

Those who cognize Zaslav judge he’s moving to stave disconnected the Ellison takeover, successful part, due to the fact that helium wants the accidental to bring the institution backmost to its glory, which would yet marque it much invaluable for its investors and prospective buyers.

For Warner management, that’s portion of the rub. The Ellisons showed up conscionable arsenic the institution was displaying signs of a turnaround, including a blistery streak by Warner Bros. that includes “A Minecraft Movie,” Ryan Coogler’s “Sinners,” James Gunn’s “Superman,” Formula One escapade “F1: The Movie,” and fearfulness flick “Weapons.”

In addition, HBO returned to its winning ways astatine past month’s Emmys, collecting an industry-leading 30 awards, tied with Netflix.

Larry, from left, Megan and David Ellison be the premiere of Paramount Pictures’ “Terminator Genisys” astatine Dolby Theatre connected June 28, 2015.

(Lester Cohen / WireImage)

Ellison’s bidding was designed to thwart Warner’s planned firm breakup.

For now, analysts said, Zaslav and the Warner board’s existent strategy is coagulated due to the fact that they person efficaciously driven up the banal price, which has doubled to $21 a stock since the Ellison’s involvement became known successful mid-September.

“They are doing the close thing,” Hardart said. “In immoderate sale, you effort to bushed the bushes and get arsenic galore radical interested. But astatine immoderate constituent the committee is going to person to marque a decision.”

Added 1 investor: “They’ve gotten Paramount-Skydance to bid against itself, and that lone goes truthful far.”

Analysts expect Philadelphia elephantine Comcast, proprietor of NBCUniversal, and perchance Netflix, Apple oregon Amazon to instrumentality a look astatine the company’s studio, room and streaming assets.

But galore spot the Ellison’s Skydance arsenic having the edge.

Paramount, successful its caller missive to the Warner board, argued that it was the champion and astir logical buyer.

“What Skydance offers WBD, successful galore ways, is what it offered Paramount: The quality to beryllium assertive and propulsion each aspects of the concern successful a mode that astir radical oregon companies that person little superior conscionable can’t do,” Miller said. “They are deploying existent capital, and they are being the astir assertive folks successful the manufacture close now.”