A New Direction

In 2021 telecommunications giant AT&T announced a plan to merge Warner Media — which owns HBO and DC Comics as well as other networks and intellectual property — with Discovery, which is currently the market leader in unscripted reality television. AT&T’s original goal in purchasing Warner Media in 2018 was to create a vertically integrated communications and content pipeline, much like competitor Comcast has with NBC and its affiliated networks.

However, Warner Media was carrying a ton of debt. Despite producing a solid lineup of critically acclaimed content, especially original television programming, Warner Bros. spent a lot of money (financed with cheap credit) attempting to leverage their DC Comics content and grow their streaming platform, HBO Max. The DC cinematic universe never really approached the heights of Marvel, and while Warner Bros. was able to generate some crowd-pleasing box office successes, it also had plenty of critically panned efforts. Meanwhile, the industry discovered that streaming subscriber numbers weren’t the revenue-generating metric they were initially thought to be.

The merger between Discovery and Warner Bros. was finalized in early August, and Discovery CEO David Zaslav took control of the newly amalgamated company. His directive was clear: to “make sure we get paid.” Zaslav’s background is in reality television, which is much cheaper to produce than scripted content. While some of the biggest stars can earn relatively large paychecks, most only get a small stipend and are required to pay for their own hair and makeup. Writers for these shows, credited as story producers, work long hours for much less than they would make developing scripted content. Neither the writers nor the people in front of the camera are unionized.

In service to his goal of cutting costs at Warner Bros., Zaslav took the unprecedented step of canceling two movies that were nearly complete and in postproduction, almost ready to premier on the HBO Max platform. The most notable of the two was the Batgirl movie, with the official line being that the film didn’t fit the new direction of the recently merged company — it was too small to be released in theaters and too expensive to recoup its nearly $120 million price tag as a streaming movie.

But that explanation didn’t add up. $90 million of that money was already spent, and the film was near completion. If Warner Bros. Discovery believed that they couldn’t earn back what they spent through new subscribers, they could have pivoted to a traditional theatrical release. In fact, they had recently done just that with another upcoming DC Comics movie, Blue Beetle. Test viewings of the unfinished Batgirl movie reportedly weren’t great but still generated sufficient positive feedback to suggest that it wouldn’t be a failure. The universally panned Morbius movie released by Sony still made $163 million at the box office. It’s highly unlikely that Warner Bros. Discovery would have lost money on a theatrical release for Batgirl, even if it underperformed in relative terms. Given the talent behind and in front of the camera, it very well could have been a hit. We’ll never know.

It was obvious to many that the real reason the movie was canceled was because of an accounting trick taking advantage of a rule that allows newly acquired companies to write off huge losses incurred as a result of a change in corporate direction. As long as Warner Bros. never makes any money on the nearly finished film, the company can save almost $25.4 million as a tax write-off.

Streaming numbers are notoriously fickle, making it hard to quantify the profits generated by a streaming-exclusive property. It was estimated that HBO Max would need about two million new subscribers to make back the money it spent on Batgirl, but even if they had hit that mark there would be no way of determining if Batgirl was the reason. Knowing this, it becomes reasonable to believe, as the company claimed, that the decision to cancel the movie was based on giving DC Comics movies a new cohesive direction, like Disney has with their massive Marvel Cinematic Universe.

However, that explanation still leaves some questions, as DC Comics’ biggest commercial and critical success to date is their Oscar-winning Joker, which earned over $1 billion at the box office. Joker exists completely outside of any cinematic universe continuity, and DC is currently ramping up casting and production for a musical sequel.

While there may have been genuine creative reasons why Batgirl was canceled, it’s hard to game them out without running into inconsistencies. Meanwhile the film’s demise fits neatly into a larger pattern of cost-saving moves made by Zaslav, increasingly the likelihood that profit prompted the move.

Back to Reality

While the cancelation of Batgirl generated the most headlines and coverage, there have since been other decisions made by Warner Bros. Discovery that are equally unprecedented and potentially destabilizing for the movie and television industry.

Recently, HBO Max began quietly removing content from its platform — mostly original movies exclusively released on the streaming platform like Batgirl was meant to be. The children’s programming and animation side has been hit particularly hard. This move goes beyond canceling unreleased projects in order to write them off: the company is removing completed movies and canceling critically acclaimed animated shows to avoid paying residuals. Content creators are suddenly finding, without warning, that their labor has been erased from existence.

Zaslav’s background in reality television is important here. Warner Bros. Discovery’s new strategy seems to be focusing on producing expensive blockbuster theatrical content for theaters with the potential of making hundreds of millions in profit, and scaling back production on smaller-scale efforts which might only garner modest returns. Batgirl most likely would have made a decent profit if released in theaters, but the prospect of paying union-negotiated residuals to the cast and crew could have seemed unreasonable to an executive used to paying onetime stipends to reality television participants.

It remains to be seen what the fallout from Zaslav’s decisions will be. It seems likely that a lot of content creators and actors will think twice before working with Warner Bros. Then again, critically acclaimed director Matt Reeves just signed a multi-project deal with the company. Either way, whether the company makes good movies or bad ones, the profits generated by Discovery’s reality-focused portfolio will buoy the merged company into the future.

Whatever the consequences for Warner Bros. Discovery, Zaslav’s moves represent a potential paradigm shift in the industry. Hollywood has a tempestuous labor history. Entertainment comes with unique labor challenges for profit-minded studio executives and owners, as they are extremely reliant on the singular talents of the labor they employ. What Zaslav is doing was previously considered impossible, because angering both audiences and talent was thought to be a death sentence for a studio. But network consolidation and the new streaming paradigm, along with the rise of super-profitable and highly exploitative reality programming, has made the impossible possible.

It appears that the issue with Batgirl was neither the quality of the material nor audience demand. The people wanted the product, and the product was ready to go to market — that’s what capitalism is supposedly good for, right? But in the eyes of one CEO, killing Batgirl was the most efficient way to reduce costs and generate profit for the company. It’s a clear-cut example of the profit motive working against the act of production, rather than incentivizing it.