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‘We Can Compete With Netflix, Disney,’ Says David Zaslav

David Zaslav Discovery Stock Options
David Zaslav

The combination of WarnerMedia and Discovery will be one of the few companies able to compete in the global market for streaming television, Discovery CEO David Zaslav said.

The company sees the opportunity for billions of dollars of cost reductions, but does not plan on making cuts at the units that create content, he said.

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Speaking at the J.P. Morgan Global Technology, Media and Communications Conference, Zaslav said he didn’t not think that there would be many large players in the streaming market, but that the offering Discovery and WarnerMedia can put together is “really complete” and ‘uniquely competitive” with Netflix and Disney.

“We think that we can be one of the three. We think we can be competitive and differentiated at that level,” Zaslav said.

Discovery and AT&T reached an agreement last week in which AT&T would spin off its WarnerMedia unit, which would be merged with Discovery, with Zaslav as CEO of the combined company.

Read Also: Discovery-WarnerMedia Deal 'Doesn't Really Change Much', Says Bob Chapek

The new company would be able to reach “the promised land,” which he described as “a fully scaled global platform that people get up in the morning and they want to watch and it nourishes and delights them in a way that they feel like it's part of who they are,” he said. “That’s what we do with Food [Network]. That's what we do with Discovery. That's what we do at [HGTV] That’s what [AT&T and WarnerMedia] do with with HBO and together. I think we’re going to make a good connection, but the  bar is getting high.”

Discovery already does a lot of business internationally, and it will be hard for newcomers to compete there, Zaslav said. “It’s going to be very difficult to compete if you’re not in language and every country,” he said. “It’s going to be very difficult, I think ultimately to be complete if you don't have some of the local relevant content. We think news and sports is kind of unique and . . . we want to invest more” in those areas.

Discovery has announced that it expects to be able to wring $3 billion in cost savings from the combined companies. Zaslav said Discovery has achieved its expected cost savings in previous deals.

“We have a transformation team that its still fully staffed,” he said. 

Zaslav said that corporate overhead was about $1 billion. “If you look at the linear business, it’s about $2 billion between us that we’re spending,” he said. ”We’ve worked that game before in terms of figuring out how to drive productivity.”

On the international side, he said “we have about $1 billion," he said, adding “all of this is non-content."

Zaslav said the $20 billion the combined companies spend on content is separate from the cost-cutting plans.

“When it comes to the Warner Brothers motion picture, the Warner Brothers TV studio, we're assuming zero [cuts] on those, because that is two teams that are best of class, that are leading in the industry, and our view is we just want them to keep doing,” he said. “And in the case of CNN, we have a little bit of synergy because we're in news outside the U S. but we're not looking at CNN in that number.”

Zaslav said another area for savings is the $6 billion the two company are spending on direct-to-consumer, non-content expenses.

“There's just a lot of overlap there. We're building a product, they're building a product. We're marketing a product, they're marketing a product," he said.