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Pivot

Let’s dive in…

At the top of this week, in her weekly reflection emails to the portfolio, our investor shared this:

“It's never too late to make a better decision.”

“The sunk costs of all the time, energy, and money invested to pursue this path could trick [you] into thinking that [you] should just keep going on to reach the end, but with a clear mind and counsel [you can] release the disappointment about what's been wasted on Path 1 in favor of the perspective that Path 2 is the right long term decision for the business.”

As someone averse to change because I can get so “disciplined” about finishing what I started, y’all, in 2 sentences, she spoke a whole sermon to my soul. TBH, I think my “discipline” is a form of perfectionism – not wanting to feel like I made the wrong choice to begin with. (Shout out to my therapist because that’s peak emotional processing right there).

But entrepreneurship, motherhood, life… all of the above require the skill to recognize when it’s time to pivot – do the next thing to get to the desired outcome.

Last week, in preparation for 2024, we talked about disruptions. The truth of the matter is that many of you, your orgs, or your industry are currently experiencing disruption. From the brutal wars, the introduction of Generative AI, and the writers’ and actors’ strikes to layoffs, interest rate hikes, and dry funding seasons across the board, we’ve had to figure out and find different paths in efforts to survive the disruptions.

How did you pivot? How are you feeling? What hard decisions have you had to make?

This week, we’re diving into the DealBook Summit and conversation with David Zaslav, CEO of Warner Brothers Discovery. The media industry is/has been experiencing an extreme disruption and David, during his interview, sheds light on how he is navigating it and the hard choices he’s had to make for the sake of the survival for the business.

Enjoy,

Amy & Bryan

P.S. Thanks to you all who expressed interest in hopping on the phone with us! We’re excited to talk to you. Also, even if you didn’t complete the poll last week, be on the lookout for an email from us too :-)

Zoom Out: Dealbook Summit

World and business leaders alike joined one another on November 30th to discuss some of the major stories affecting them and our world. It’s a successor to the DealBook Newsletter, where Andrew Ross Sorkin, NYT columnists, and his colleagues set out to help make sense of major business and policy headlines.

The Dealbook Summit is a one-day summit where Sorkin, since 2011, interviews the likes of

• Former FTX chief executive Sam Bankman-Fried.

• Ukrainian President Volodymyr Zelensky

• Leader of the country’s largest union-owned bank, Priscilla Sims Brown

This year, Elon Musk went viral for telling advertisers to f*ck off, Vice President talked about polling and polarization, and Jamie Dimon shared how he distinguishes between politics and policy (I loved his talk).

Held in NY, previous Summit’s were priced at $2,499. A ticket includes mainstage conversations, VIP Networking Sessions, Breakfast and Lunch, and a cocktail reception. While registration and purchasing a ticket is possible, there are also invitations curated and distributed exclusively by The New York Times.

Zoom in: David Zaslav, Warner Bros. Discovery C.E.O., on Hollywood’s Challenges

David Zaslav, CEO of Warner Brothers Discovery, which includes a robust portfolio of some of our favorite TV shows and networks like  Max, HGTV, TBS, CNN, Discovery, TNT, etc.

A GQ headline regarded him as “The most hated man in Hollywood.” The negative headlines are plentiful about David Zaslav, and rightfully so based on the industry’s descriptions of him (eg., $10M salary and extravagant parties while writers were on strike). I believe his talk does illuminate strategies to consider (or learn from) when navigating pivots and sifting through disruption.

Andrew set the stage: “On May 17, 2021, the deal to merge AT&T Warner Media and Discovery had just been announced. At this time, before the ‘Netflix Correction’, Disney shares were at $172 a share; now they are at about half. When the AT&T and Discovery deal closed, the stock was at $24. Today it’s at $10 something.”

This talk will help you:

1. Consider how to reframe disruption as an opportunity to possibilities

2. Consider the painful and tough decisions required for the survival of the business.

3. Appreciate the significance of being singularly focused when wading through adversity.

Learnings from “The Most Hated Man In Hollywood”

The Generational Disruption:

As Dave describes it, when he took over 20 months ago the industry was already in disruption. “Warner was spending $36 billion on content, but they were making less than that. Everyone was chasing subscribers. The capital markets had run away with Netflix as the leader. And the industry was following. They were spending over a billion dollars on direct-to-streaming movies. Eventually, Dave blew the whistle and said ‘Direct-to-streaming movies don't work.’ Everything about the industry had changed— The way people consume content, on what platform, long form, short form. Are people still going to be going to the movies? “ 

If we were to leverage Darryl’s disruption scale from last week, I think the magnitude of this disruption would fall under the transform markets category: “This idea of people consuming content on TikTok, going to different streaming services. It's a generational disruption, and it requires more aggressive, tougher, faster decisions. It's a very scary time to be running a [media] company, but it's also an exciting time because everything's possible.” For David, these possibilities need to be focused on one main thing: Create a healthy and profitable company. 

Here are some steps he and the board of directors are taking in an attempt to build through the disruption…

• Asked the right questions Leaders should continually reassess their business with fresh eyes. Asking critical questions about the business model, required resources, and organizational structure is essential. This approach ensures that the business remains agile and adapts to changing market conditions.

  David asked questions like: “What does this business look like if we were going to start today? What content do we need? What content is going to help us? How many people do we need? What should HBO look like? What should Warner Brothers look like?

• Reframe the problem Asking the right questions can also help reframe the problem into an opportunity. It can be hard to push through adversity if all you see is adversity. Reframing the problem creates space for you to think creatively about the possibilities you have as a result of the problem. Constraints breed creativity. Leverage creativity as a means to disrupt the disruption. Reinvent the company– pivot!

• Incentivized leadership: Aligning the interests of the leadership team with the company's financial health can drive significant results. The board agreed to de-link David’s compensation from the stock price to how much cash flow he can create. What’s a non-traditional, but effective incentive you can consider for your business?

  “If you look around the media business, you have streaming services losing billions of dollars, companies losing money, and the key for us, the artillery that we needed that was existential, we need a healthy company that makes real profitability and real free cash flow. And so they decided to create for the entire leadership team, an incentive to say, pay that debt down, generate free cash flow. Then it worked. The whole leadership team got behind it and we generated in the last 12 months, over 5 billion of free cash flow.”

   

• Restructured the business: Streamlining operations and restructuring to meet current market demands are crucial. This might involve making difficult decisions, but it's necessary for long-term sustainability and competitiveness.

  “It used to be that you could have 80- 100 people at every cable channel. Now you have one marketing team running all of it. So we had to restructure the entire business. People are the toughest thing. I remember our first big layoff. It was brutal at Warner Brothers, Time Warner and even Discovery. These are companies that had never really been restructured for the future.”

• Restructured the content: For businesses in content-driven industries, holding onto valuable content and strategically deciding what to keep or let go of is key. Why David pulled Batgirl but kept The Flash, is not clear to me. However, I do believe that having a clear understanding of what content will drive the business forward and what won’t is key.

  “We held onto all the content that we thought would be helpful to us and the content that wasn't, we made a strategic decision on and it was difficult. And it was painful but I think it was the right decision for the company and it was necessary.” 

• Went on a ‘Listening Tour’: Who should you be listening to consistently? Creating the space to engage stakeholders provides the necessary insight needed to move the company forward.

  “My job as a CEO is to get to know the business. That's why I went out and I spoke to everybody that I could about the motion picture business and the scripted business, what they learned, and what mistakes they made. In the end, I think I got smarter. It was also helpful in building the creative team that we have. I also went to LA and spent the year inside the Green Light or the motion pictures at HBO understanding how those businesses are put together. Now I have leaders and I can step back and allow to lead. It was very important for me to get out there.”

• Focusing on growth: David has managed to pay down a lot of debt, but the stock price is still suffering. Finding creative and sustainable ways to engender growth is of extreme importance. If it’s not growing then it’s dying.

  When questioned about the possibility of being acquired, David made it clear that they have everything they need and would simply focus on growth. “From our perspective, we're positioned next year for growth, to invest in more content. We want to grow Max around the world, and build the profitability of Max.”

Serendipitous collisions in the hallway

• A solid Introduction to LLMs

• Behind the scenes at Art Basel Miami Beach

• Grand opening, grand closing

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