Warner Bros: embattled Zaslav needs a script doctor

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David Zaslav, the chief executive of Warner Brothers Discovery, said on Thursday that the US media company was “in the business of storytelling”. In the current narrative, Zaslav appears to be the ham-fisted corporate villain. In recent months, university students have jeered him and Steven Spielberg and Martin Scorsese have wrangled with him amid a strike by rank-and-file Hollywood writers and actors.

On Tuesday, Zaslav did not have much good news on the big picture in Hollywood. The best tale the former mentee to GE’s “Neutron” Jack Welch could drum up involved bean counting.

The company’s streaming service Max hit adjusted ebitda break even in the quarter after losing $550mn in the same period of the previous year. WBD’s gross debt balance fell to $48bn after it paid back a couple of billion of borrowings. It is on its way to shrinking its leverage ratio from 4.6 times currently to under 3 times over the next 18 months. Annual savings from the merger of Discovery and Warner Media are set to rise from $4bn to $5bn.

But the plot remains complicated. WBD had boosted near-term profits by licensing valuable intellectual property to other distributors such as Netflix. But this controversial practice can help competitors.

WBD’s cable networks are suffering from the pay-TV cord-cutting movement. Zaslav will have to decide how many billions to pay to keep NBA basketball rights.

Like rival Disney, which is pondering the future for its ESPN network, Zaslav must judge whether news channel CNN is worth selling off to a specialised owner.

The company says free cash flow could hit $5bn for the year. An extended work stoppage could provide even more near-term upside. WBD’s stock price is down 50 per cent since the merger closed 16 months ago and its enterprise value now sits at $76bn.

The group’s numbers are decent to good, given diminished expectations. But Wall Street has soured on big entertainment companies. Their economics do not currently work either for the essential talent or the capital markets. That script will be hard to flip.