Discovery CEO Tells Wall Street Goal Of WarnerMedia Merger ‘Is To Compete, Not Win Spending War’

deadline.com:

Discovery execs, attuning commentary around recent investor sentiment on streaming, reassured investors this morning that they will not overspend on content as the company merges with WarnerMedia early in the second quarter.“Our goal is to compete with the leading streaming services, not to win the spending war,” CEO David Zaslav said on a conference call following it latest earnings.

His comments come with Wall Street angst growing on the business models of streaming. Disappointing subscriber growth forecasts at Netflix last month accelerated doubts and led to a rout of Paramount Global shares last week.

Twin worries are over losses and lower cash flow as the renamed company plans to ramp up content past $6 billion by 2024, and, at the same time, that it still may not be enough to compete with streaming leaders.They seemed to have similar concerns with Discovery and Zaslav was peppered with questions about spending.

He acknowledged that “we don’t know exactly what we are going to need to do.” He noted the company has strong free cash flow and anticipates spending more, but carefully, “and you’re not going to hear us say we are going to spend $5 billion more.” Zaslav also questioned the premise that more original content offers a proportional balance sheet boost.“If you say we do 600 hours on Food Network and they like it and we make $400 million, for example, if we did another 400 hours of content, maybe audiences would be a little happier but we would make no money.”“If you look at what Casey is doing with HBO, he has Euphoria and had Succession and has period drama The Gilded Age.