Only in Hollywood could a deal that sees a new player created out of two existing groups be pictured as a big, bold, dramatic…
Forget the multibillion-dollar loss by one company, tens of billions of dollars in debt, some of the best known global brands (Netflix, Apple, Amazon, Disney) as the off-screen “baddies” to the plucky new contender, a string of looming job losses (including the CEO of one of the companies who wasn’t told about the sale and merger plans) and the winner is: the highest paid executive in US media who is set to earn a billion US dollars by the time a six-year contract to run the new company ends in 2027.
In every big deal, attention focuses on one person: the dealmaker, adviser, banker or CEO. In the case of the US$43 billion sale of Warner by AT&T and the merger with Discovery, it’s Discovery’s CEO David Zaslav.
Zaslav is already a legend in US business and media as perhaps the most highly paid executive (outside some family owners like the Redstones at ViacomCBS or the Murdochs at News Corp/Fox Corp). Discovery floated on Wall Street in 2007, and by the end of 2020 Zaslav had been paid a total of US$690 million (A$886 million) in cash, shares, options and other benefits. That’s an average of more than US$53 a year, or US$1 million a week. (More on that later.)
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Now he has to merge Warner Media with Discovery, which is said will be a US$150 billion company in the making (a massive US$55 billion in debt will make sure of that estimate). It will be all about streaming video and building enough subscribers to be able to chase Netflix, Disney, Amazon and Apple into the future of films, TV and everything else.
The merged company will have close to 80 million subscribers through several streams — a long way behind Disney (103 million at the end of March), Netflix (208 million at the same time) and close to 200 million between Amazon (through its Prime service to customers) and Apple through its 1.5 billion customer base. Neither giant releases its streaming customer numbers.
It’s a typical media story: everything new is great again. Wasteful AT&T spends US$134 billion buying Warner and loses more than half that (while boosting debt to US$155 billion) getting rid of DirecTV in February for about US$16 billion in cash and securities to buyout group TPG. Now its getting rid of Warner for US$43 million in cash, shares and the value of debt Warner will hang on to (hence that US$55 billion millstone for the new company).
In all deals there’s a winner and a new sun king, and in this case it’s Zaslav.
His appointment as CEO of the new company has raised eyebrows among some AT&T investors and Warner employees. AT&T shareholders will own 71% of the company; Discovery shareholder will control 29%. And with US$3 billion in “synergies” on the table, Warner staff know (after two big whacks by the incompetents at AT&T) they are in the firing line, not their counterparts at Discovery.
But Zaslav has chopped before to make the US$14.6 billion Scripps takeover work from 2018 and into 2019, and will do the same again in this final gig.
He has been paid for results and growth at Discovery — from just US$2.2 million in 2007 his pay has soared and slid (relative to the peaks). The most eye-catching amounts were US$156 million in 2014 and US$128 million in 2018. Industry reports suggest they related to contract renewals. In his second year, 2008, he earned US$8 million.
On Tuesday his contract was extended to 2027 when he will be 68. Old owners (such as Murdoch and the late Sumner Redstone) are allowed to go past retirement age; old CEOs rarely do so. So if he earns his yearly average of US$53 million up to 2027, that’s another US$370 million or thereabouts to pocket which will boost his gross to more than a billion US dollars. Ka-ching!