Ad market worse than during lows of the pandemic, says Warner Bros Discovery CEO David Zaslav

The advertising market is currently weaker than at any point during the coronavirus pandemic slowdown of 2020, Warner Bros. Discovery Chief Executive David Zaslav said at an investment conference Tuesday.

If the ad market doesn't improve next year, "it's going to be hard" to hit the company's $12 billion earnings forecast for 2023, Zaslav said at RBC's Global TIMT Conference in New York.

Zaslav's comments signal a change in rhetoric from large traditional media executives who generally said this summer that advertising slumps weren't significant for them even as digital media players saw a pullback. Advertisers have reduced spending as the Federal Reserve has raised interest rates to cool inflation, pressuring equities including media companies'.

Things got "a lot worse" during the past few months, Zaslav said.

Warner Bros. Discovery has had its valuation cut in half this year. Other companies reliant on advertising, such as Snap, Meta and BuzzFeed, have all fallen more than 65% this year.

Merging Discovery with WarnerMedia earlier this year has brought a series of unforeseen challenges because some assets were "unexpectedly worse than we thought," Zaslav said.

HBO went from making more than $2 billion in 2019 to losing about $3 billion last year as content spending surged, according to Zaslav. The CEO has changed course for HBO Max as it gets set to merge with Discovery+ next year, including eliminating low-rated shows and bigger budget movies made only for the streaming service.

"It's messier than we thought, it's much worse than we thought," Zaslav said. He added, however, that he didn't want to buy a company "that was really well run" because it would have limited the upside of the merger. Zaslav has been cutting costs since the deal closed in April and plans to lay off over 1,000 more employees before the end of the year, CNBC reported last month.

Zaslav also said Warner Bros. Discovery would stay disciplined when NBA rights renewal discussions accelerate next year.

"We don't have to have the NBA," Zaslav said. The company has plenty of sports offerings without it, he added.

Still, Zaslav reiterated he'd like to do a deal with the NBA. He recently renewed star broadcaster Charles Barkley's contract for 10 years, though the contract includes a clause where Barkley could leave if Warner Bros. Discovery doesn't renew its carriage agreement. The NBA's national TV contracts expire after the 2024-25 season.

Any NBA deal will need to be future-looking, said Zaslav, incorporating both the company's streaming service and sports assets, including Bleacher Report, which reach younger audiences.

Shares of Warner Bros. Discovery rose more than 3% on Tuesday.

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