Warner Bros. Discovery CEO Zaslav is banking on linear TV as he plans a streaming future

Warner Bros. Discovery President and CEO David Zaslav speaks to the media as he arrives at the Sun Valley Resort for the Allen & Company Sun Valley Conference July 5, 2022 in Sun Valley, Idaho.

Kevin Dietsch | Getty Images

The most important decision for any great media CEO is how prepared they are for the future.

Warner Bros. Discovery Chief Executive Officer David Zaslav has opted for strategic limbo.

Unlike former WarnerMedia CEO Jason Kilar, who was outwardly forward-thinking and centered the company around HBO Max, Zaslav is retreating from a streaming-first mentality to support his company’s theatrical and linear TV businesses for so long keep going as possible.

Zaslav on Thursday reiterated his stance that Warner Bros. Discovery will not approach the streaming wars as a race for the most subscribers. His comments come as Netflix has lost more than 60% of its value over the past year after halting subscriber growth for the first time in a decade, prompting media and entertainment to reconsider their own streaming strategies.

Warner Bros. Discovery has officially announced that it will launch a combined HBO Max-Discovery+ product in the US by mid-2023, and has set a goal of reaching 130 million subscribers worldwide by 2025. That’s about 40 million more customers than subscribe to HBO Max and Discovery+ today, a far cry from the 221 million subscribers who already pay for Netflix worldwide.

Zaslav made clear he believes in both theatrical releases and the longevity of traditional pay-TV as “a cash generator and a great deal for us for many years to come” during his company’s second-quarter earnings call Thursday.

But he’s also committed to spending “significantly more” on HBO Max and adding Discovery programs to the streaming service. Zaslav also announced Thursday that Warner Bros. Discovery will be developing a free, ad-supported service to pair with the combined HBO Max/Discovery+.

Kilar caused quite a stir during the pandemic when he decided to release his entire 2021 movie slate on HBO Max while the films hit theaters at the same time. While this turned out to be a temporary move, Kilar later stood by the decision to simply be the first to switch.

“History is already looking pretty positive,” Kilar told Deadline in an April interview. “It worked. We were the first over the wall.”

In stark contrast, Zaslav on Thursday emphasized the importance of theatrical release for big-budget films, scrapping this week’s Batgirl, which Kilar booked a ticket for straight to HBO Max. Getting expensive films to stream directly doesn’t make economic sense, Zaslav said. Batgirl cost $90 million to make.

“Our conclusion is expensive direct-to-stream movies, in terms of how people consume them on the platform, how often people buy a service for them, how they feed themselves over time is no comparison to what what happens when you launch a movie into theaters,” Zaslav said. “This idea that expensive movies are streamed directly, we can’t find any economic value for it, and that’s why we’re making a strategic switch.”

It’s not Zaslav’s first reset during his tenure.

Kilar also drove the launch of CNN+, a $300 million project to give CNN a digital streaming strategy. Similar to Batgirl, Zaslav decided to kill the streaming service before it got a chance to prove itself successful.

Zaslav said Thursday he believes the power of live news lies in traditional pay-TV rather than streaming. This indicates that CNN live programming will not be carried over to the HBO Max/Discovery+ product at launch or in the near future.

“We consider live news to be crucial for the linear pay-TV service,” said Zaslav.

Deciding to push HBO Max forward while trying to slow the decline of the box office and linear pay-TV is a juggling act. But it’s also the plight of the modern media CEO. Moving too far into the future cannibalizes cash-flow positive companies.

It may not be strategically clean. But it’s the hand that Zaslav plays.

“I’ve been at this a long time,” Zaslav said, adding that he “hung out” with former General Electric CEO Jack Welch when he ran NBCUniversal, where Zaslav worked. “Broadcast was dead in the ’90s, or at least that’s what people said. But in the end, that reach and ability to push promotional products kept it alive. We firmly believe in it [in overall reach] and we think that will help us.”

WATCH: Paramount Global shares plummet, Warner Bros. Discovery puts ‘Batgirl’ on shelves

Disclosure: CNBC is part of NBCUniversal.

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