- WarnerMedia and Discovery will seek $3 billion in synergies when they merge.
- A big part of those savings could come from cutting staff and overhead, impacting thousands of jobs.
- Insiders and experts predicted which areas could be most impacted.
- See more stories on Insider’s business page.
WarnerMedia and Discovery will be looking for $3 billion in “synergies” as part of their planned merger. That might concern a lot of people.
In big corporate mergers such as these, as much as 75% of the pledged cost savings can come from cutting staff and overhead, such as benefits and office space, a person who has worked with corporations through restructurings estimated. Some cost savings could also come through sharing resources, such as deduplicating subscription costs for sales software and professional services fees.
Discovery and WarnerMedia expect the deal to close in the middle of 2022, meaning any cost-cutting measures including layoffs probably won’t happen immediately.
But, when there are layoffs, this person said financial reporting, marketing, and communications are usually among the first divisions hit.
“When you’re talking about $3 billion in savings, and most of that is in people costs, you’re talking about thousands of people,” this person said. “You have to consolidate sales, distribution, HR, finance, administration, real estate, benefits, information technology, legal and business affairs.”
Ad sales might be cut sooner than other divisions because the new company will want to demonstrate its bigger, broader audience to advertisers and media buyers, the source added. To do so, the ad sales operation has to be solidified.
One media analyst pointed out that Warner already went though robust cost-cutting and that advertising sales could be somewhat spared because of the importance of their client relationships.
AT&T CEO John Stankey hinted at potential cuts in a memo sent to WarnerMedia employees Monday, which was obtained by Insider.
“While overlap in our creative and content capabilities is virtually non-existent, there will be opportunity to redirect investment away from duplicative back-office, support and administrative functions into our growth strategies,” Stankey wrote.
The combined entity sets up the prospect of one-stop shopping for traditional and streaming airtime and sponsorships with brands spanning CNN, Turner, HGTV and Food Network, all under one roof.
Both companies have their own US ad sales heads: Jon Steinlauf at Discovery and JP Colaco at WarnerMedia. Brian Wieser, global president of business intelligence at GroupM, suggested that advertisers might wonder if the person they’re dealing with today might be gone in a year.
How will Discovery chief executive David Zaslav, who’s set to run the combined company, choose between Discovery and WarnerMedia staff?
A second industry source who has worked with big media companies going through mergers said they thought Zaslav would keep WarnerMedia people who have great reputations and skills in positions where Discovery doesn’t already have someone doing the same job. But in cases where there is overlap, like the CFOs and heads of international, the source thought Zaslav will keep his own people.
“David’s had a very loyal team for a very long time,” this person said. “Most of them came over from NBC with him all those years ago…They finish each other’s sentences.”
Savings also could come from real estate
Reducing real estate could be part of a broader shift coming out of the pandemic. Discovery and WarnerMedia may look to shed real estate — particularly office space — that they no longer need as some staff continue to work remotely, that same source said.
The combined company could also consolidate its presence in London and other places where both companies have offices.
Experts and insiders agreed there will be little overlap on the content side as WarnerMedia and Discovery have complementary assets and content is how the companies are pitching the merger as a way to compete with Netflix and Disney.
“We think one of the differentiating features is live news, live sports,” said Zaslav, selling the deal to Wall Street and the media on Monday. “And when you put that together with non-fiction it’s compelling.” Live TV news and sports has been much more resilient to declines in traditional TV viewing than entertainment programming and has continued to attract advertising dollars.
A Warner Bros. film exec told Insider they weren’t concerned about layoffs, saying Discovery needs scripted content.
But the exec also thought there would be a lot of corporate redundancies, pointing particularly to WarnerMedia CEO Jason Kilar. (The New York Times reported on Monday that Kilar had hired a legal team to negotiate this exit).
Zaslav’s personal relationships with some WarnerMedia power players led some to feel optimistic about the combined company.
Zaslav is a longtime golfing buddy of Jeff Zucker and talked up CNN at the press conference on Monday. Similarly, the Warner Bros. exec noted that Zaslav was a friend of Warner Bros. chairman Toby Emmerich, who he also praised during the press conference.
Source: Read Full Article