The Washington PostDemocracy Dies in Darkness

David Zaslav reinvented Discovery. Now he’s building a new streaming giant.

Discovery CEO Zaslav is the big winner in the deal to combine his company with WarnerMedia to take on streaming giant Netflix. But it’s said he was slow to see streaming as the future.

Discovery Communications CEO David Zaslav in 2018. (Richard Drew/AP)
NaN min

David Zaslav is a cable guy.

“Zas,” as he is known to friends, spent the first two decades of his career at NBC, where he helped launch CNBC and MSNBC before taking the helm at Discovery in 2007. He took Discovery public, turned it into a reality television kingpin, then brought it back to its documentary and science-oriented roots. He made it a live sports destination with the acquisition of Eurosport and a deal to provide coverage of the Tokyo Olympics in international markets. During his tenure, Discovery’s profits more than doubled.

But the 61-year-old network executive was slow to take to streaming — now the pinnacle of media — even as competitors launched services and cable subscriptions dwindled. Discovery launched its streaming bid, Discovery Plus, only in January. It claims to have surpassed 15 million paying subscribers in April.

Tuna Amobi, an analyst with CFRA Research who has followed Zaslav for years, said he was surprised when he learned Zaslav had been the architect of a $43 billion deal announced this week that would merge Discovery with AT&T’s WarnerMedia and put him in charge of a giant whose creation seems intended to compete with the likes of Disney and Netflix.

WarnerMedia merger with Discovery will form a streaming behemoth that includes HBO, CNN, TBS and TNT

On earnings calls, Amobi remembers Zaslav advocating for a “wait and see” approach when it came to streaming. He thought Zaslav — whose success has come in part from the low costs Discovery enjoys on its non-fiction programming — seemed reluctant to wade into the world of big-budget production that is at the core of strategies to win streaming customers.

Zaslav is an “extremely well-regarded guy” who has evolved with the industry, Amobi said. His hallmark is “seeing things some people might fail to see.” Yet his skepticism toward streaming cost Discovery the chance to get in early.

“Discovery was a late mover in the streaming wars,” Amobi said. He guessed that Discovery Plus could have amassed 100 million subscribers by now if it had launched a couple of years sooner.

After years of running Discovery’s unscripted empire, Zaslav is poised to run a behemoth that crosses all genres — scripted, unscripted and news — and that includes such Hollywood franchises as Harry Potter and Batman. The new, not-yet-named company plans to spend $20 billion a year on new content, enough to eclipse what heavyweights like Netflix and Disney plan to spend.

“David Zaslav is the clear winner,” analysts at LightShed Partners wrote in a commentary after the merger was announced. The commentary calling the merger “transformational for Discovery." Zaslav, the commentary said, gets to run a far bigger, better positioned company than the assets he brought to the table. The combined company is projecting $52 billion in revenue by the end of 2023; Discovery’s revenue for 2020 totaled just under $10.7 billion.

Discovery did not respond to a request from The Post for an interview about Zaslav’s leadership and his plans for the company.

Documents filed with the Securities and Exchange Commission on Tuesday show Zaslav signed a contract extension through 2027. They did not include details about his compensation, but Zaslav has regularly been among the highest-paid CEOs in America: he earned $37.7 million last year amid the pandemic crunch; in 2018, he gained around $130 million, with $100 million coming from stock grants when he signed a new contract.

Discovery’s stock has swung wildly in recent months, in part due to the collapse of Bill Hwang’s Archegos Capital. It hit a high of $77 a share in March, soaring alongside ViacomCBS and then shedding half its value after Archegos failed to meet a margin call and investors unwound positions. Discovery’s shares declined 1.6 percent on Tuesday, adding to a 5 percent decline Monday as investors reacted to the WarnerMedia deal.

Founded in the 1980s as a producer of documentaries in the Maryland suburbs outside Washington, the Discovery Channel first hit the airwaves with an after-school special about icebergs. In the decades since, Discovery has evolved into the New York-based parent of dozens of domestic and international properties.

Discovery found success as television’s champion of reality programming in the 2010s, home to “Naked and Afraid” and “Sex Sent Me to the ER” and “Here Comes Honey Boo Boo". Its ratings exploded, and the advertising money rolled in.

But eventually, Zaslav felt compelled to bring Discovery back to its documentary and science-based roots.

“One day we just came in and looked at each other and said, ‘You know, no more bearded guys in the kitchen with f---ing pigs running through the living room,’” Zaslav told The Post in 2016. “Let’s get back to who we really are. We’re about satisfying curiosity.”

Under Zaslav, Discovery’s distribution platform has grown to reach 3 billion viewers worldwide, the company says on its website. In 2018, it acquired Scripps Howard Networks in an $11.9 billion deal that brought the Food Network, HGTV and the Travel Network into its folds. Zaslav has pointed to the deal as evidence of his ability to successfully merge cultures, as he now seeks to do with Discovery and WarnerMedia.

“The integration and growth of the Scripps assets has gone better than anybody thought,” said Neil Macker, senior equity analyst at Morningstar Research. “He’s shown some ability to do it, but this is a much larger challenge in terms of size.”

Discovery’s two most-watched programs last year were coverage of the May launch of astronauts Bob Behnken and Doug Hurley to the International Space Station, with live coverage of the launch itself drawing 4.7 million viewers to the live program on its namesake channel. (The Washington Post has a production agreement with Discovery for that programming.)

Streaming has exploded during the pandemic. The average American household now subscribes to four streaming services, according to a 2021 survey from J.D. Power, spending an average of about $47 a month on those subscriptions.

The willingness of people to continue to pay for those subscriptions will be key to the success of the new company, whose name is expected to be unveiled next week. Discovery reported a 4 percent decline in ad revenue in the first three months of 2021, citing lower ratings and “to a lesser extent secular declines in the pay-TV ecosystem.” Subscribers to its cable portfolio also fell 4 percent compared to the same period in 2020.

But Discovery’s unscripted portfolio has given it an edge in the pandemic when it comes to production. It was saving an average of $300,000 for every hour of content shot at home, while Hollywood ground to a halt, Discovery’s CFO told the Wall Street Journal last summer.

From Peacock to HBO Max, here’s what every major streaming service can offer you

Zaslav himself has theorized that few platforms will survive the streaming wars. He’s betting that Discovery’s clout in the nonfiction market, coupled with WarnerMedia’s blockbuster empire, will make it “the best media company in the world." He told CNBC he believes that, in the long term, the new combined company could bring in up to 400 million subscribers. That would be more than Netflix and Amazon combined.

“David has done a great job of transforming Discovery to the leading purveyor of unscripted content,” Macker said. Now, “he’s going to head one of the largest media companies in the world.”