WHEN: Today, Friday, February 4, 2022
WHERE: CNBC's "Squawk Box"
Following is the unofficial transcript of a CNBC interview with Discovery CEO David Zaslav on CNBC's "Squawk Box" (M-F 6AM – 9AM ET) today, Friday, February 4th for AT&T Pebble Beach Pro-Am in Pebble Beach, California. Topics include: merger with WarnerMedia, CNN's Jeff Zucker's resignation, among others. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2022/02/04/discovery-ceo-on-warnermedia-merger-this-is-a-fantastic-collection-of-assets.html.
All references must be sourced to CNBC.
JOE KERNEN: Welcome back to Squawk Box. We're live from Pebble Beach. Joining us now to talk more about the merger between AT&T's WarnerMedia Discovery. Someone who hopefully does a lot of product discovery CEO David Zaslav. I generally go back I do not like the dog chasing the bus are you in catches it that's like all by god what am I gonna get? I finally got it. What am I gonna do but I mean this is a big job you've got now and it's a daunting future. And I glad that you not me, obviously but media is difficult. How are you going to where is media and what are you going to do with this this great new, shiny object you have?
DAVID ZASLAV: Well first, it is a little bit surreal. This is a fantastic collection of assets. And I've been at Discovery for 16 years and we've been we've gone from a cable business, a US cable business to the leader internationally, we added sports and we added free air and we've always owned our IP. To put that together now at the time of transition with the great assets that John Stanky and his team have HBO really in a leadership position in terms of quality and content. Warner Brothers television over almost 400 shows that are the biggest producers makers of content in the world. Warner Brothers motion picture. And CNN. You know, the greatest news gathering organization and news the only really powerful global news force in the world. Putting that all together. It's really formidable and it is exciting. We've been spending a lot of time thinking about what can we do, but it's coming. I think it's really the right time, because more and more when consumers are thinking about where they want to go they don't want to go to eight or nine different places and they're not going to pay for multiple, multiple different options and we have when this company comes together this is something that John and I spent a lot of time talking about, over the broadest menu of entertainment, from kids to adults to teenagers, the greatest movie library TV library, and we have more local content than anybody in the world motion pictures. So we have this great entertainment menu, which should keep people in the homes and the kids that have grandparents. Why would they go anywhere else? And then w are the leader and news to the left. And we're now one of the leaders.
KERNEN: Definitely did you say to the left that you weren't kidding? No, that was an aside I probably should have said.
ZASLAV: So it's at a time of disruption, owning more IP, more diversity of IP and being able to get on a train that's already moving the cell mostly 74 million subscribers. We have over 20 million subscribers. We have we have very, very low churn. We've been able to spend years trying to figure out what do people like what do they want more of so as John and Ann and Jason And so together I think we're going to get on this track and we're gonna take it for ride it.
KERNEN: As in the past a I really think this is like a transformative deal, obviously, but everybody else suddenly is in a position like with the changing landscape. I don't know about streaming, how many are going to be eventually how much money you're gonna make with that how many it's just does everyone else have to do they have to do something? What's Comcast got to do? What's the what's Disney got to do with Viacom right? What does everyone else have to do in this new world that you're creating?
ZASLAV: Well, I'm focused on I know what I need together with a great leadership team and the great assets that but you mentioned two points. One is how you're going to make money. The difference between this company and the overall fundamentals of any other media company that I have seen is that we see in 23, that we're going to be generating $8 billion or more in free cash flow, and $15 billion in EBIT and over $50 billion in revenue. That's a real company. So you've seen a lot of volatility in the market with okay, we got a lot of companies that are hey, look what I have for the future. Warner Brothers Discovery has great fundamental economics. So we're going to be less than three times levered after 24 months, and here we are with $8 billion in free cash flow and growing and on the right side of the company. We got HBO, we got HBO Max, we have all of our IP, we have all of our sports the leader in sports in Europe. There's a deal that we announced yesterday with BT, and I want to talk about, we're a leader in kids. We're a leader in news and over time, we have the money. You know, one of the biggest challenges we're going to have is how do we deploy that free cash flow for growth? We're not a company balanced on, hey, in a couple of years, we're going to make some money and we're going to be okay, no, we have that balance we got and I think more and more the market is going to recognize and it's starting to recognize, hey, this is a real company with real profits.
KERNEN: You kind of opened the door to the CNN discussions, I think because you you have been quoted as saying how important it is to the company. And you just you mentioned that again, and people have pointed out that you know, now with Jeff gone, Jeff Zucker gone, you've got to figure out a strategy there and how to move forward with that. And I know you're gonna tell me that you can't talk about it yet because you don't have the company yet. And you're probably precluded from doing that, but talk in general terms about whether that's an issue since as you say it's such an important part of the new company.
ZASLAV: Sure it will look news, and we've seen this throughout my 30 plus years in this business. It's people get up in the morning and they want to know what's going on and am I okay, what's going on in the world. When I got when I got to NBC in 1988, Jack Welch and Bob Wright hired me to build a cable group. We launched CNBC, we launched this service look how powerful as services around the world. Then we launched with Microsoft, MSNBC. After we launched CNBC, we launched together with Chuck Dolan the first regional news network News 12 Long Island. News is critical. It's something people watch every day. And when you look at the churn, on these subscription services, one of the most powerful indicators is how often do they go there. So we're now so one I believe that news is going to be really critical and you can own it, sports is more of a rental business unless you wanted a league all the entertainment we have we own, news we own and we're the leader in news in Poland. So, we're not new to this game. I've been around news for more than half of my career.
ANDREW ROSS SORKIN: Hey, David. It's Andrew here back in New York. What because you're talking about news, but the question that I was going to ask you is about the strategy continues to the extent you can talk about the strategy of CNN+, which was going to be a separate subscription product and whether that is going to be the case in the future, or you think that that ultimately works better as part of this package bundle you're talking about, but I'm also hoping you can speak directly, Jeff of course, was a good friend of yours for many years, I imagine he continues to be a friend of yours. Was he a key man in your mind for this transaction?
ZASLAV: Hey Andrew, I can't speak to, we're two separate companies. I haven't been involved in any of the decision making. In fact, I haven't really gotten business reviews yet on a number of the businesses or really any of the businesses and that's because of the legal process we have.
KERNEN: Any conjecture that John Malone is behind the curtain in any of these, John Malone said it'd be good if CNN had some journalists, that would be where I'd start. So you've got a guy who's run it for nine years and CNN has now I think CNN in a totally different way than I thought about it years ago. I do. And John Malone when you hear him and he's still a big part of your life, big part of Discovery, if he says we need CNN—
ZASLAV: I love John. I mean John—
KERNEN: We need CNN to go back to reporting news, not—
ZASLAV: But John is going, is a board member of this company and I am the operating—
KERNEN: He had nothing to do with—
ZASLAV: None of us had anything to do with it. We're running our business. So to your point Andrew about news, I and we as a company, we are a fighter for news. We're the leader of news in Poland for the past three or four years. We're the only news source in Poland. We have a few 1,000 people there on any given night at 6:30. 40% of that population turns to us. We have a 24-hour news channel. We've been in hand-to-hand combat because the government has been trying to take us out. Trump helped us stay alive in Poland, and recently the Biden administration. We were this close at the end of the year and we were fighting really for the for the people of Poland to be able to provide a fair and balanced news service. So you know, in from, from my perspective, news is going to be a critical element. We happen to offer it in Poland as part of our overall entertainment package and it really works well. But we've offered sports and entertainment separately so we'll have to see really.
SORKIN: David, you know where we left off and my phone's been blowing up actually during this period from folks frankly at CNN who are desperate to know just your personal views about Jeffrey giving your friendship with him, given their affection for him, and also the future of what CNN+ looks like. Again, I know that these are things that you haven't solved yet in terms of what the future is going to hold and you may not very well be involved in it today. But I think people want to understand strategically how you're thinking about CNN+ and CNN as part of potentially their HBO Max package or whatnot.
ZASLAV: Sure, Andrew. Look, Jeff is a good friend of mine. I can't speak to this issue. I don't, we don't own the company yet. We're not involved in any of that. In terms of CNN+, we couldn't be more excited about the fact that they've been hiring great journalists. CNN has the greatest group of journalists in the world. It's the only global news gathering, news organization in the world. We're already in the news business. We believe in it. We think it's a huge differentiator and it's something that for the long-term was going to be a fantastic asset for us. I haven't gotten a business review on what CNN+ is going to be and how it's going to be offered. I'm looking forward to it. And I think directionally, it's absolutely what we need to do. The objective is that CNN would be seen everywhere in the world on every device so people get up in the morning and they'll turn to us for what's going on in their country and what's going on around the world. That's powerful, that's differentiating versus a Netflix or a Disney, and it's core to who I am. You know, it's this is what I was doing when I went to when I went to NBC and it's wide News 12 Long Island was so and all these regional news networks grew because people get up and they want to know what's going on in their community, what's going on in their country, what's going on in politics. And so, CNN is a fantastic asset. I can't wait to get in there. We have huge ambitions for it. The leadership team there has great ambitions for it and it's going to be extremely exciting and it creates a company, news, entertainment, and sports and as I said earlier, this is a real company. $8 billion in free cash flow and 14 billion in EBITDA, I said 15 but it's 14 in EBITDA and over $50 billion in revenue, a real company that makes real money that's building for the future.
QUICK: Hey David, there was a great Vanity Fair article that chronicled kind of the listening tour you've been on for the last eight, nine months, talking to people all over the place. This is a company that's kind of been in turmoil, has gone through different ownerships several times over the last few years. And I think people were hoping that they'd be hearing what they heard from you. That you're interested in storytelling. You want to see how this goes. You've been doing all this listening. What do you kind of tell people back after some of these things? What what's the next step?
ZASLAV: Well, first, we're all in turmoil. Every company is in turmoil because it's changing the way people consume content, where they consume content. HBO, Warner Brothers, Warner Brothers Television, all of our assets. It starts and ends with great storytelling, with great talent, with great writers, with great producers. We've seen that. That's how we've grown around the world. John has built an extraordinary company of great talent. I have spent a lot of time because it's – a lot of this is new to me. And I'm trying to learn as much as I can from the people that were successful. I'm learning a lot about what worked in the past, but we're together – us at Warner Brothers Television – to figure out how to make this work in a new world where people are going to be viewing content and – sports, entertainment, news on every device. And I'm super excited. I was so happy to see John. We played golf together with you, Joey, on Wednesday. He's a great guy, a great leader and I believe strongly that we're going to be looking at each other in a few years – Warner Brothers, Discovery is going to be the greatest entertainment company in the world. And John is going to be running the number one telecom company in the world. We have that opportunity.
KERNEN: Looking beyond getting this all done to interactive stuff. You buy a gaming company, you do a draft – I don't know. Are you looking beyond where you are right now? Do you have to do that?
ZASLAV: Well Warner is in gaming. They have a very profitable gaming business. It's a very well positioned company. Gaming reaches a great demographic. It's a great menu of IP and they own all of it.
KERNEN: But you're not done I don't think.
ZASLAV: We are just getting started.
QUICK: Yesterday the deal on BT with sports also a huge part of that, too.
ZASLAV: That's our DNA. We're already the leader in sports in Europe. UK is a really important market to us. We just structured a deal yesterday with BT where we pick up the Champions League, the Premier League, Rugby, together with our Euro sport and all of our sports assets. And we did it with no – with very little downside and no cash. Because we're a strong sports operator in the UK. We put it together with BT sports rights. We run it. And we're in a position now where we're a leader in sports in the UK, which positions us together with our entertainment product that's in the market for a few years from now when the HBO content comes back from Sky, we're going to be very – we are formidable now, we're going to really be formidable in the future. And that's our recipe. Is news, sports, entertainment. The full menu.
KERNEN: Thanks for hanging around and staying after what was a pretty big jobs report. That's great, but it is good. I guess the Fed. But thanks, David. Let's get to Cramer.