THE MORNING RANT: As Warner Bros Discovery circles the drain, CEO David Zaslav extracts generational wealth for himself

A subject that I frequently re-visit is corporations that are mismanaged into financial and operational crises while leadership lavishly rewards itself.

While I have kept an eye on the headlines regarding the takeover bids for Warner Bros Discovery, I hadn’t bothered to read much deeper, because the entertainment / media industry is a bit of a mystery to me, and because it is controlled by my political adversaries. But perhaps in part for those same reasons, I have become friends with the pseudonymous “George MF Washington,” who is a closeted conservative working with the movers and shakers in Hollywood. Mr. GMF Washington kindly suggested to me that I add David Zaslav’s personally rewarding destruction of Warner Bros Discovery (“WBD”) to my “bad business tally.” Mr. Washington wrote:

To add to your bad business tally… WB’s David Zaslav did such a bad job his distressed studio is about to functionally disappear… there will be hundreds if not thousands of layoffs, many from the very divisions that created the value Netflix now wants to own. And despite this abysmal record, Zaslav is going to walk away from this deal with the reward of generational wealth for his failure.

It doesn’t take much digging to see what a mess Zaslav has made, and how obscenely he has rewarded himself despite (or because of ?) the destruction he has wrought.

Some quick background - David Zaslav was a successful executive at NBC before taking the helm at Discovery Communications. Meanwhile, AT&T had bought Time Warner Media in 2018. By 2022, AT&T decided to unload that same entity, which it had renamed Warner Media.

Mr. Zaslav and Discovery took on about $40 billion in debt to buy Warner Media, plus it assumed Warner’s existing debt, leaving the post-acquisition company (named Warner Bros Discovery) choking on about $50 billion in debt. The cost of digesting the merger, along with a variety of operational reasons, caused WBD to start losing money, which was really inconvenient since it needed to service all that debt.

Over the following three years, Warner Bros Discovery lost over $21 billion.

These tremendous losses necessitated severe austerity measures, including several rounds of layoffs putting thousands of employees out of work. Those laid off employees weren’t actors. They were everyday people behind the scenes in sales, accounting, production, etc.

The actual owners of the company, its stockholders, also took a financial drumming thanks to Zaslav’s stewardship of the company. A decade ago, Discovery stock was trading at about $40 per share, and it hit $50 per share shortly before the Warner Brothers acquisition. But as WBD bled red ink and focused on cost cutting, its top line revenue started decreasing too. Losses combined with negative revenue growth are a toxic combination to investors, resulting in the stock price dropping about 80% to less than $10 per share.

Despite the rolling financial catastrophe at Warner Bros Discovery, Mr. Zaslav continued to be richly compensated. Over the past three full years, his total compensation exceeded $140 million. In 2024 alone, a year that WBD suffered an $11 billion loss on declining revenue, Mr. Zaslav was rewarded with total compensation of $52 million.

Despite WBD’s persistent losses and its doubtful ability to service its debt, it houses a valuable film library, and it still owns some desirable properties such as HBO and Warner Bros Studios. Netflix and Paramount are both making bids to purchase WBD at about $30 per share, which doesn’t recoup all the money investors have lost, but it is much better for stockholders than the bankruptcy that seems imminent if WBD remains independent.

Unfortunately for WBD’s employees, its acquisition will result in thousands more jobs being eliminated by the acquiring entity.

But where does that leave Mr. Zaslav and his executive team? Don’t worry, they’ll be fine.

According to The Hollywood Reporter, upon the sale of Warner Bros Discovery, Mr. Zaslav will receive $30 million in cash plus another $537 million in equity, for a total golden parachute of $567 million. Several of Zaslav’s top lieutenants will also receive golden parachutes worth in excess of $100 million. That is impressive compensation for destroying a company. Think of how much they’d be worth if they were running a profitable company with revenue growth.

I am a free market capitalist. I don’t write these types of articles because I’m seeking government action to regulate away the behavior of people such as Zaslav. Just the opposite. To keep the socialists at bay, there is an obligation for us free marketeers to police those who are accessing levers of power to extract wealth rather than create wealth. If corporate boards don’t start putting some controls on parasitic executive behavior, people will start voting for politicians who will.

[buck.throckmorton at protonmail dot com]

posted by Buck Throckmorton at 11:00 AM

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