We Read the Warner Bros. Discovery Shareholders’ Letter So You Don’t Have To

Can David Zaslav catch a break?

He’s pulling off an amazing transformation of a what had been a struggling company — he’s turned a $10 billion quarterly deficit into a $1.5 billion profit in a single year — but all people can talk about is the shiny new Skymount Paradance merger.

The facts: although Warner Bros. Discovery (WBD), of which he is the CEO, is certainly larger by 2024 revenue and market share than Paramount ($1.2 billion vs. $881 million; 13.5% market vs. 10.3%), Paramount, due to the Skydance acquisition, has gotten all of the recent attention (multiple mentions on late night television vs. no mentions on late night television).

And, for some reason, Wall Street was similarly unimpressed. On August 4, when the earnings were announced, WBD stock closed at $12.80. The next day it closed at $12.72. By the end of the week it closed at $10.91.And that’s after turning Q2 2024’s report of $9.99 billion net income loss into $1.58 billion to the upside and a 9% increase compared to last year of total adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to $2.0 billion in Q2 2025

That’s good stuff.

But WBD has a plan. Not a mere plan, in its Q2 letter to the shareholders, it is described, as, drum roll please, a “strategic attack plan.”

The elements of the plan are to:

• Return the studios “to industry leadership” (Disney and Universal might have something to say about Warner Bros gunning for #1)
• Scale HBO Max globally (perhaps it really ought to settle on a logo before trying to do that, given that as recently as July it was just “Max”)
• Optimize “our Global Linear Networks” (a.k.a. make the most of things like CNN, TBS, and various other cable brands)

Certainly the first is of the most interest.

WBD has three studio groupings: Warner Bros. Motion Pictures, DC Studios, and Warner Bros. Television (WBTV).

And the studios — or as WBD has it, “our iconic studios” [bold added, but surely intended] — are where there’s plenty of revenues ($6.1 billion in the first half), which means there is plenty of attention and corporate verbiage spewed out about them.

Like:

Indeed.

In Q2 Warner Bros. Motion Picture Group released four films that did exceedingly well for the studio: A Minecraft Movie, Sinners, Final Destination: Bloodlines, and F1.

The four films fit nicely into that slicing of film production and, of course, monetization into four slices — one per “quadrant.” (Perhaps it is lucky for WBD shareholder letter writers there weren’t five high-performing films because then they’d have to talk quintants, and who knows what those are?)

For example, A Minecraft Movie not only showed the company’s prowess in producing and marketing a film, it also proved it could “eventize” a movie. Remember some of the consternation expressed by some audience members when others threw popcorn in the air and jumped out of their seats when Jack Black yells “Chicken jockey!”? Warner Brothers capitalized on that, creating a “Block Party Edition” of the film to encourage singing, shouting and otherwise turning the viewing of a movie into an “event.”

Sinners, the company claims, shows how it is committed to “partnering with the industry’s top creative talent.” Isn’t that pretty much standard operating procedure: Get the best people to make the best films? How surprising is it that the likes of Ryan Coogler (writer/director) and actors Michael B. Jordan and Hailee Steinfeld are the sorts of people a studio might want to align itself with?

The sixth edition of Final Destination showed the studio’s “ability to strategically leverage our intellectual property,” which some might just call “milking IP.”

And F1 demonstrated its “exceptional distribution and marketing prowess.” What? By sending the film out to everyone who still loves [the enduringly popular] Brad Pitt? Such prowess!

But, if you thought the previous quotation about quadrants uses somewhat opaque jargon, consider this following paragraph, the nearly incomprehensible verbiage of which indicates that the whole approach to movie releases is going to be executed with more operational complexity than NASA landing a rover on Mars:

Yes, it is all about algorithmic execution.

Given that Paramount chairman and CEO David Ellison’s dad is Larry Ellison — the single largest shareholder in Oracle, the enterprise/cloud/database company — odds are Paramount is going to have a leg up on Warner Bros. They’ve got data. Lots of data. If the future of profitability in film production is predicated on who has more NVIDIA chips at its disposal (or on who deploys the most clear prose), then maybe WBD will be passed by Paramount.

The downside for audiences, of course, is that what gets released on screens is essentially what the data analysts calculate —which may make “partnering with the industry’s top creative talent” less germane. Who needs creativity when you have data?

Annually WBD is planning to releasing 12 to 14 films. This number consists of 1 or 2 “tentpoles” from Warner Bros. Pictures that will be based on “well-known Warner Bros. IP,”: not a whole lot of originality.

In addition to that there will be one or two from DC, three or four from New Line Cinema (taking advantage of the current popularity of horror), and one or two WB Animation movies. The plan also promises “A select number of moderately budgeted original films.” The compound adjective “moderately budgeted original” should be concerning for those who are looking for originality, but is undoubtedly music to the ears of shareholders.

The DC characters are considered by the company to be “one of the most valuable assets in entertainment.” While acolytes of the MCU might have the Avengers throw down against the Justice League any day of the week, the “one of” weasel word gives DC a pass.

There is a “10-year vision for the DC universe.” This not only includes Supergirl: Woman of Tomorrow, Clayface, The Batman II, and another Wonder Woman movie, but “an exciting array of television projects,” including The Penguin, Peacemaker, and Lanterns.

And in addition to “eventization,” the company will go big on commodification, with plenty of toys, games, mugs, Happy Meals, umbrellas and the like.

By mid-2026 Warner Bros. Discovery is dividing into two publicly traded companies: Streaming & Studios and Global Networks. Zaslav is heading the former. In addition to all of the studios, it includes HBO Max and the associated film and TV libraries (which should “leverage its monetization,” as WBD letter-writers might put it).

So in this case Zaslav catches the break. Current Warner Bros. Discovery chief financial officer, Gunnar Wiedenfels, who will become president and CEO of Global Networks, however will find himself having to deal with an array of TV brands that are at or passed their sell-by dates in terms of audiences and so will have a global mess on his hands

But “that’s show business!” (Emphasis on the business.)