One of the things I learned as a financial news reporter is that Wall Street loves a good leadership mythology. A wise, forward thinking corporate executive who has a vision of what can be and has the skills to lead their company to the promised land of big profits and few competitors.

When Warner Media and Discovery Inc came together to form Warner Bros. Discovery, a lot of time was spent courting the press and planting the seeds of the myth of David Zaslav. That he was a "talent friendly" executive who courted creatives and would be able to somehow encourage innovation while simultaneously cutting costs and maximizing shareholder value. To be fair, while the storyline might have been hooey, it made for a great story hook and every major entertainment trade and outlet bought into it.

But here's the thing. Zaslav's track record running Discovery was successful enough. But it certainly wasn't overly impressive and it certainly didn't merit the executive making one of the highest CEO reimbursement packages in any industry. David Zaslav took a number of linear assets that were successful and managed not to destroy them. Which I suppose is a positive, but it certainly doesn't suggest an innate ability be innovative. Particularly when his reputation internally was for being hard-nosed with all but the highest-level talent while squeezing every possible nickel out of the production and marketing process.

Zaslav's reign at Discovery was also know inside the company for his bouts of "I know better" decision-making. He would latch onto an idea, and not give it up unless there was literally no other option. One former executive at the company described a Zaslav idea they were forced to try and make work. And despite endless efforts, it quickly became clear the executive was convinced the problem was not with the idea, but with the execution. "He latched onto that crappy idea like a dog chomps onto a bone. A big, dumb, bone," the executive told me.

Zaslav is now the head of Warner Bros. Discovery and if you want an example of his executive prowess, you need to look no further than the apparent decision to shift course and leave the streaming service Discovery+ as a standalone service instead of combining it with HBO Max into one big super streamer.

According to a number of sources I've spoken with at the company over the past few months, this idea of a combined streamer has been in place since even before the merger of the two companies had been completed. Zaslav was reportedly convinced it made sense for strategic and content reasons. Combining the two subscriber groups would give the new service even more heft in the very competitive streaming market. One executive I spoke with recounted a presentation where the first saw the infamous "HBO Max is from Mars, Discovery+ is from Venus" infographic, which argued that Discovery+'s female-leaning subscriber base combined with HBO Max's male-centric subscribers would make for a perfect fit. And by taking only the best from each service, WBD could cut content spend across the company and focus primarily on the most popular titles.

On the face of it, that argument makes some sense. But problems quickly emerged once teams began diving into the nuts and bolts of the new service.

A primary issue was the cost. After a planned $1 per month increase (which was implemented this past January), HBO Max cost $16 a month for ad-free streaming, or $10 a month for ad-supported streaming. Discovery+  currently costs $5 per month with ads or $7 per month without ads.

Excluding any annual plan deals or other discounts, a subscription to the ad-supported versions of both services would cost $15 per month. Strategically, it would make sense to price the new combined service at a slight discount in order to retain current subscribers - particularly those who were only subscribing to one of the two services.

But it quickly became apparent that there were a couple of problems with that strategy. Testing of the idea showed a great deal of resistance, especially from current Discovery+ subscribers. Results showed many of those subscribers either watched primarily programming from the Discovery networks or if they were looking for movies and other content, they were already a subscriber to a rival service such as Netflix. The idea of paying a monthly subscription fee two or nearly three times the current costs for the rest of HBO Max was a non-starter with a large number of people polled.

According to sources, Zaslav and other members of the executive team were not convinced of the subscriber reticence, attributing the reluctance to a misunderstanding of what they were trying to build. And in fact, several executives pointed to other studies which suggested that HBO Max and Discovery+ were under-priced in the market when compared to competitors. They pushed internally for a full price closer to $19.95, although heavily discounted for the first few months. 

However, a bigger roadblock was that content spend and flow at HBO Max and Discovery+ are very different. While the core of HBO Max's success has been the availability of content from HBO, programming comes from all parts of the Warner Brothers catalog: theatrical movies, library titles, some programming produced for the WBD linear networks as well as a healthy dose of HBO Max originals. The production costs are spread across the various divisions and HBO Max more closely resembles a traditional general interest streamer. It's brand is diffuse by design as a way to appeal to as wide (and global) an audience as possible.

The value proposition for Discovery+ is very different from HBO Max. It's branding is highly integrated with Discovery's most popular linear TV channels and testing suggests many subscribers are using it primarily as a next-day home for their favorite shows as well as an alternative to watching the traditional linear networks. Discovery has also aggressively used the service to share content spend across the company. Nearly every title produced for linear ends up Discovery+, often same day and before its linear premiere. And the lion's share of Discovery+ originals end up eventually receiving a delayed linear premiere. Which shares the costs of the originals across both platforms and makes the process extremely cost-efficient.

Combining Discovery+ into a larger service would disrupt that financial synergy. The combined service would have a smaller overall catalog and in fact, some Discovery+ titles had begun disappearing from the service in advance of the move. But a smaller catalog as well as fewer Discovery+ originals would also impact some of the linear network programming plans. Especially in the case of the popular true crime network Investigation Discovery, which makes extensive second window use of Discovery+ originals.

I was also told that aside from all of the other challenges, it became apparent at some point in the production process for the new service that combining even a scaled-down version of Discovery+ content with a similarly scaled-down HBO Max would result in a service impossible to navigate. "There are arguably too many brands on the existing service, " one engineer I recently spoke with explained to me. "Imagine HBO Max, but worse."

In the end, apparent decision to keep the two services separate was the only reasonable decision and unfortunately for Warner Bros. Discovery shareholders, an apparent executive suite love of the idea resulted in a great deal of wasted time and resources. "The word 'elites' get thrown around a lot when conservatives talk about Hollywood," an unhappy executive told me last week. "But in this case, this was primarily a situation where people who don't regularly use the product thought they had a better sense of what worked than the customers themselves. I'd bet anything that David Zaslav has never sat down in front of the TV and thought 'Hey, let's watch the new episode of Chopped.' But those are the people paying the bills."






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