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Bitcoin miner Zack Pettit skating on his work break at the SCATE Ventures mining facility in Dallesport, Washington.
SCATE Ventures Inc.

Nick Sears was 17 years old when he helped build a bitcoin mining farm in Dallesport, Washington. He was 18 when he was legally allowed to buy bitcoin for the first time. And now, at 19, Sears has doubled down on his life as a bitcoin miner, saying “no” to college and “yes” to living in a room inside a data center that houses 4,500 whirling ASICs. 

“My room is sound-locked,” said Sears of the acoustic retrofitting of his living quarters. “So I can’t hear the machines when I close my door, but they are definitely noisy if I have my door open.”

The machines generate about 80 decibels of noise apiece — but Sears says he likes being as close to the action as possible. It also beats making the half hour commute each way from his parents’ house in White Salmon. 

The 19 year-old has spent pretty much every single day for the last two years teaching himself the nuances of how mining machines work – and crucially, how to fix them. He believes his education in soldering and electronics is worth a whole lot more to him than a university degree. 

“I don’t think about going to college at all, just pursuing further knowledge in the repairs of the miners,” continued Sears.

CNBC spoke with multiple miners for this story. Many explained that the allure of mining comes from being able to tangibly grasp the power of bitcoin. 

“If you’ve been to any of these data centers, the first thing you’ll notice is just how vast and how impressive they are. They’re huge,” said explained Thomas Heller, chief business officer for Compass Mining, which works with Sears’ employer, SCATE Ventures. 

“There’s so much noise, and there’s so much heat. There’s just so much action going on. It is quite cool to walk into a data center for  the first time that’s mining bitcoin, because you can really connect the intangible aspects of bitcoin as a currency, with the physical nature of these machines consuming power and doing these calculations.” 

Bitcoin miner Nick Sears lives on-site at the SCATE Ventures mining farm in Dallesport, Washington.
SCATE Ventures Inc.

A day in the life of a miner

Mining for bitcoin isn’t a glamorous job.

“When we first got here, we were setting up racks, creating the network infrastructure for the internet, and we essentially had to wire everything,” he said. 

Once the physical infrastructure was up and running, Sears got into more of a rhythm. He’s now up at 7 A.M. everyday and works from eight to four. He remains on site afterwards, just in case of an emergency, and there is a technician who works night shifts so that Sears can get some sleep.

But beyond the hours, there is no typical work day for Sears. 

“That’s the cool thing about this job – I don’t have a set routine that I do everyday,” he said. “Every morning, I find what needs to be fixed.” 

Some days, that means Sears repairs walls and other physical infrastructure. “If we have to repair a camera, maybe I’m fixing a cable.”

But the biggest part of the job is monitoring and managing every one of those 4,500 Bitmain and Whatsminer ASICs to ensure they are running 24 hours a day, seven days a week. If even one of those machines goes offline, or is only running at partial capacity, the SCATE Ventures mine loses money.

That’s because when someone is mining for bitcoin, what they are actually doing is lending their computing power to the bitcoin network. The more machines you have online, the better your chances at winning bitcoin.

Rig under inspection at the SCATE Ventures mining farm in Dallesport, Washington.
SCATE Ventures Inc.

Roughly every ten minutes, 6.25 bitcoins are created. In order to mint these new tokens, a global pool of miners are all contributing their computing power to running a hashing algorithm. But these miners aren’t working in a vacuum. They’re competing against each other to see who can unlock each batch of new bitcoin first. 

So the stakes are high for Sears. Being diligent and knowing how to triage issues across the entire facility is critical to success.

Some mining sites use more sophisticated software to monitor the machines, which includes checking the temperature of each hashboard within the individual miners. 

But most important for Sears is just figuring out which of his machines aren’t functioning at full capacity. 

“Every day, you find the machines that have stopped hashing, then you remove them from the rack, and you troubleshoot,” he explained. “You’ve got to find the problem with the machines. You’ve got to find out why it went offline.”

It could be a power outage, which would affect all the machines, or it could be a network outage which could impact all of the machines or just some. 

“Sometimes they just need a power cycle or a reboot,” he said.

But the hardware fix isn’t always as simple as that. 

“It could be that the fan on the individual machine that is used for cooling is broken, or maybe it’s the power supply that needs to be repaired or replaced,” explained Heller.

“It could be the hashboards themselves,” continued Heller. “Each hashboard has lots of individual chips, and those are the chips doing the calculations. I think with a Bitmain machine, if more than four chips on a single hashboard are broken, the whole hashboard will switch off. So instead of hashing at about 100%, you’re only hashing at two-thirds or one-third.” 

Seasonal changes in the weather add a whole other layer of complexity. 

Lead technician Nick Sears repairs hardware at the SCATE Ventures Inc. mining farm in Dallesport, Washington.
SCATE Ventures Inc.

Storms can lead to power outages or other disruptions. Heller says that in the summer, the machines can also overheat, especially at the farms which have upgraded to using more powerful units over the course of the last two years. 

SCATE’s mine in Washington seems to have found a way around this problem by using its own immersion cooling technology, which involves submerging bitcoin miners in a non-conductive fluid to dissipate heat, rather than relying on fans. 

Training up and getting paid

Sears may not need a diploma to mine, but taking online training courses run by Chinese engineers who work for Bitmain has gone a long way toward helping him repair specialized mining equipment.

Last month, Sears and another employee completed a virtual class through Bitmain to learn how to work on the ASIC chips on hashboards, as well as the power supplies of the S17s, one of the most popular machines now used to mint bitcoin. 

“I have a certification of maintenance repair, so lately, I’ve just been perfecting my skills in that category,” explained Sears. “It certifies my knowledge and gives me access to buy supplies and material directly through Bitmain.”

Lead technician Nick Sears at the SCATE Ventures Inc. mining farm in Dallesport, Washington.
SCATE Ventures Inc.

Next, he hopes to attend an in-person class in Atlanta, Georgia, to learn more about soldering. “The hard part is learning how to solder and disassemble a circuit board,” said Sears.

Sears’ boss, Scott Bennett, is big on giving his team access to the resources they need to get better at their jobs. 

Bennett, CEO of SCATE Ventures, is a self-taught miner who started his business in his parents’ garage back in 2017, just before the last crypto “winter,” when prices of bitcoin and other cryptocurrencies plunged. Similar to Sears, Bennett once lived at one of his data centers – only he opted for an on-site camper, rather than a room inside the facility itself. 

It helped that he lives within minutes of some of the cheapest power in the world. 

“All of our facilities are 100% hydro powered,” said Bennett. 

The mining facility where Sears works is next to the Columbia River and directly adjacent the Dalles Dam. “We love that source of power. It’s cheap, renewable, and very abundant,” he said.

As for employee pay, Sears says that he makes $54,000 a year, plus full health insurance, which is paid for by the company. 

Bennett also runs some mining machines exclusively for his employees. That amounts to about .02 BTC quarterly, which by today’s price equates to a $788 bonus every three months to Sears. 

“With all the miners in China going offline, the difficulty rate has been changing, so the rewards are higher,” said Sears. “The last time we got a little bit more than we did the previous time, which is cool by me.”

The SCATE Ventures mining farm runs on hydropower generated by the Dalles Dam.
SCATE Ventures Inc.

Mining remotely

It is also possible to become a crypto miner without physically handling any mining equipment at all.

Adam Gitzes decided in early 2021 that he really wanted to mine for bitcoin. After his wife vetoed the idea of installing equipment in their home, he began to look for alternatives.

Gitzes discovered Compass Mining, which allows customers to buy mining machines for between $5,800 and $11,700, then locates them in partner data centers and takes care of the physical logistics.

“I bought the machines on the website, Compass managed the logistics, delivering the machines to three different data centers in North America,” said Gitzes, who explained he spent 1.1 bitcoin — about $60,000 at the time of purchase — on them.

“Compass also configured them the way that I asked.”

So a typical day in the life of a miner like Gitzes consists of waking up and checking online to see how much bitcoin his machines mined overnight and to ensure that none of his units are down.

Inside the SCATE Ventures mining farm in Dallesport, Washington.
SCATE Ventures Inc.

Gitzes owns six machines that he says are on the “higher end.” When China expelled all its miners, Gitzes says it doubled the amount of money that his machines generate daily. 

After paying the mining pool fee of 1.25%, Gitzes’ miners generate about .0055 bitcoin a day, or $216 at today’s prices. Daily electricity costs are about $30, so he’s pulling in roughly $186 a day, or just shy of $5,700 every month. At that rate, he’ll recoup his investment in about 11 months, assuming no major fluctuations in energy or bitcoin prices.

Gitzes was so impressed by the Compass business model that he quit his job at Amazon to join the team in March. “The mission to decentralize mining and make it so that everyone can participate is something that I find really important,” said Gitzes.

The SCATE Ventures mining farm is in Dallesport, Washington.
SCATE Ventures Inc.

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Tim Cook says Apple will use chips built in the U.S. at Arizona factory

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Tim Cook says Apple will use chips built in the U.S. at Arizona factory

Tim Cook says Apple will use chips built in the U.S. at Arizona factory

Apple CEO Tim Cook spoke at an event in Arizona on Tuesday, ahead of remarks expected by President Joe Biden later in the day, where Cook confirmed Apple will buy chips built in the U.S.

Cook said Apple would buy processors made in a new Arizona factory, according to a video from the event.

“And now, thanks to the hard work of so many people, these chips can be proudly stamped Made in America,” Cook said. “This is an incredibly significant moment.”

The chip factories will be owned and operated by Taiwan Semiconductor Manufacturing Company, the biggest foundry company with over half of the global market share. TSMC produces the most advanced processors, including the chips in the latest iPhones, iPads and Macs.

The plants will be capable of manufacturing the 4-nanometer and 3-nanometer chips that are used for advanced processors such as Apple’s A-series and M-series and Nvidia‘s graphics processors.

“Today is only the beginning,” Cook said. “Today we’re combining TSMC’s expertise with the unrivaled ingenuity of American workers. We are investing in a stronger brighter future, we are planting our seed in the Arizona desert. And at Apple, we are proud to help nurture its growth.”

TSMC currently does most of its manufacturing in Taiwan, which has raised questions from U.S. and European lawmakers about securing supply in the potential event of a Chinese invasion or other regional issues. Chip companies such as Nvidia and Apple design their own chips but outsource the manufacturing to companies like TSMC and Samsung Foundry.

The factories in Arizona will be partially subsidized by the U.S. government. Earlier this year, Biden signed the CHIPS and Science Act into law, which includes billions of dollars in incentives for companies that build chip manufacturing capabilities on U.S. soil.

TSMC said on Tuesday that it would spend $40 billion on the two Arizona plants. The first plant in Phoenix is expected to produce chips by 2024. The second plant will open in 2026, according to the Biden administration.

The TSMC plants will produce 600,000 wafers per year when fully operational, which is enough to meet U.S. annual demand, according to the National Economic Council.

The U.S. plants will be a small fraction of TSMC’s total capacity, which produced 12 million wafers in 2020.

AMD CEO Lisa Su said in remarks on Tuesday that AMD plans to be a significant user of the TSMC Arizona fabs.

American chip company Intel has also said it wants to compete for Apple’s business and is building chip factories in Arizona and Ohio, which are expected to be partially subsidized by the CHIPS act.

Last year, Intel said it would act as a foundry for other companies, although its manufacturing abilities currently lag behind TSMC’s. That makes Intel less attractive for the fastest chips.

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Former FTX engineer quietly became multimillion dollar Democratic donor after new role at cryptocurrency exchange

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Former FTX engineer quietly became multimillion dollar Democratic donor after new role at cryptocurrency exchange

FTX logo with crypto coins with 100 Dollar bill are displayed for illustration. FTX has filed for bankruptcy in the US, seeking court protection as it looks for a way to return money to users.

Jonathan Raa | Nurphoto | Getty Images

Former FTX CEO Sam Bankman-Fried wasn’t the only company executive who put big money behind campaigns aligned with the Democratic Party.

A year after Nishad Singh became the company’s director of engineering, he quietly emerged as a reliable political donor for Democrats, according to over a dozen Federal Election Commission records reviewed by CNBC.

Singh, who became FTX’s lead engineer in 2019 following a stint at Bankman-Fried’s trading firm Alameda Research, has donated over $13 million to party causes since the start of the 2020 presidential election, according to state and federal campaign finance records.

Singh donated $8 million to federal campaigns in the 2022 election cycle, and all of it went to Democrats, according to the nonpartisan OpenSecrets. He was among a handful of former senior officials at FTX who were deeply involved with financing the 2022 midterms.

The sum makes him the 34th highest donor to all federal campaigns across the country during the latest election, ahead of other party donors such as billionaires Tom Steyer and angel investor Ron Conway, OpenSecrets said.

Singh’s only recorded campaign donation before he took the senior role at FTX was a $2,700 contribution in 2018 to Rep. Sean Casten, D-Ill., a member of the House Financial Services Committee.

Two years later, Singh donated $1 million to Future Forward USA, a PAC that backed President Joe Biden’s 2020 run for president, records show. Singh lists Alameda Research as his employer on the filing showing the $1 million donation.

Records show some of his donations mirrored those made by Bankman-Fried. The former FTX CEO gave $5 million to the pro-Biden PAC the same month Singh contributed.

Singh, who was among the FTX leaders initially fired after the company collapsed, did not return repeated requests for comment. He reportedly was one of Bankman-Fried’s roommates and contributed to FTX’s philanthropic arm.

A prolific Democratic donor

Singh’s multimillion dollar output in the midterms makes him only one of the key FTX figures who piled money into the election cycle.

Bankman-Fried contributed $39 million during the 2022 midterms, while co-CEO of FTX Digital Markets Ryan Salame donated another $23 million, according to OpenSecrets. Bankman-Fried gave most of his money to Democrats, while Salame aimed to boost Republicans.

Still, Singh was known in the crypto political fundraising world as a “Bankman-Fried guy,” who made many of the same campaign contributions as the former FTX CEO, according to a strategist for multiple crypto-backed political action committees. Those who declined to be named in this story did so in order to speak about private conversations.

Bankman-Fried and FTX are under investigation by federal authorities and regulators after it was discovered that the cryptocurrency company funneled billions of dollars in FTX client funds into Alameda Research. FTX filed for Chapter 11 bankruptcy last month.

Bankruptcy court filings show that Alameda made $4.1 billion in related party loans, including a $543 million loan to Singh.

The former lead engineer at FTX spread his money across a variety of Democratic causes before the company’s collapse.

Singh gave a combined $2 million in June and July to the Senate Majority PAC, a super PAC that helped Democrats maintain their majority in the U.S. Senate. That’s double the amount Bankman-Fried contributed to the same organization throughout the midterms. That super PAC is currently spending millions to help Sen. Raphael Warnock, D-Ga., defeat Republican candidate Herschel Walker in a runoff campaign for a Senate seat in Georgia.

A PAC spokeswoman declined to comment.

Singh lists a mailing address in Los Altos Hills, Calif., on the FEC filings showing the contributions to the super PAC. The home was sold last year for over $4 million and features a wraparound deck next to an outdoor hot tub, according to Zillow.

Singh gave $4 million, combined, in August and September to Reproductive Freedom for All, a campaign that boosted a Michigan ballot measure called Proposition 3, according to state records. The ballot measure approved last month effectively codifies abortion rights for people in Michigan.

The $4 million Singh gave to the group doubles billionaire Mike Bloomberg’s $2 million contribution to the same organization in September, records show. A representative for the campaign did not return requests for comment.

Singh gave another $1 million last year to Mind the Gap, a super PAC that was co-founded by Barbara Fried, a lawyer and Sam Bankman-Fried’s mother. The super PAC has reportedly acted as a donor advisory group that helps Democrats raise campaign cash. Singh’s donation was the single largest contribution the PAC has ever received, according to OpenSecrets.

The FEC filing showing the $1 million to Mind the Gap lists Singh’s mailing address as an over 7,000-square-foot-home in Saratoga, Calif. The home is estimated to be worth $8.5 million, according to Zillow.

Fried did not return a request for comment. Representatives for the PAC also did not return requests for comment.

Scrutiny of FTX builds

The political donations came in the buildup to FTX’s collapse. Washington has increased its scrutiny of FTX, and the House Financial Services Committee is preparing to hold a hearing on the platform’s implosion later this month.

The committee has called on Bankman-Fried to testify. The former FTX CEO said in a tweet on Sunday that he may not testify in front of the committee during the Dec. 13 hearing, citing his need to finish “learning and reviewing what happened” at his crypto company.

Committee Chair Rep. Maxine Water, D-Calif., insisted to Bankman-Fried in a tweet on Monday that “it is imperative that you attend our hearing on the 13th.” A lawmaker on the committee told CNBC that, as of Monday evening, Waters had yet to tell members privately that she will subpoena Bankman-Fried to testify.

John Jay Ray III, the current FTX CEO, is going to testify on Dec. 13, according to House Financial Services Committee ranking member Rep. Patrick McHenry, R-N.C.

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David Zaslav’s top priority at Warner Bros. Discovery: Get the cash flowing again

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David Zaslav's top priority at Warner Bros. Discovery: Get the cash flowing again

David Zaslav

Olivia Michael | CNBC

A few months ago, after a lengthy and sobering review of Warner Bros. Discovery‘s business, Chief Executive David Zaslav gave his division heads a cutthroat mission.

Pretend your units are family businesses, Zaslav said. Start from scratch and prioritize free cash flow, he added, according to people familiar with the matter. Then, Zaslav said, come back to me with a new strategic plan for your unit.

Zaslav’s directive has led to what will amount to thousands of layoffs at the company by the middle of this month, said the people, along with substantial strategic changes at CNN, the Warner Bros. film studio and other divisions.

The CEO formed his plan after he took a hard look at the finances of the combined WarnerMedia-Discovery, a deal that closed in April. Zaslav determined the company was a mess. AT&T mismanaged WarnerMedia through neglect and profligate spending, he’d decided, according to people familiar with his discussions. The people asked not to be identified because the talks were private.

Warner Bros. Discovery’s total debt of about $50 billion was tens of billions more than the company’s market capitalization. About $5 billion of that debt is due by the end of 2024 after paying off $6 billion since the close of the merger. The company could push back the maturity on some bonds if necessary, but interest rates have risen dramatically, making refinancing much costlier.

To pay down debt, any company needs cash — ideally, from operations. But the near-term trends suggested Warner Bros. Discovery’s business was getting worse, not better. The company announced free cash flow for the third quarter was negative $192 million, compared to $705 million a year earlier. Cash from operating activities was $1.5 billion for the first nine months of 2022, down from $1.9 billion a year earlier.

Along with the rise in rates, Netflix‘s global revenue and subscriber growth had slowed, prompting investors to bail on peer stocks — including Warner Bros. Discovery, which had spent the past three years developing streaming services HBO Max and Discovery+. Moreover, the advertising market was collapsing as corporate valuations flagged. Zaslav said last month the ad market has been weaker than at any point during the 2020 pandemic.

Warner Bros. Discovery shares have fallen more than 50% since WarnerMedia and Discovery closed the deal in April. Its market value stands at about $26 billion.

In addition to job cuts, Zaslav’s directive spurred the elimination of content across the company, including scrapping CNN original documentaries, Warner Bros. killing off “Batgirl” and “Scoob 2: Holiday Haunt,” and HBO Max eliminating dozens of little-watched TV series and movies, including about 200 old episodes of “Sesame Street.”

The immediate decisions allowed Zaslav to take advantage of tax efficiencies that come with changes in strategy after a merger. Warner Bros. Discovery expects to take up to $2.5 billion in content impairment and development write-offs by 2024. The company, which has about 40,000 employees, has booked $2 billion in synergies for 2023. Overall, Zaslav has promised $3.5 billion in cost cuts to investors — up from an initial promise of $3 billion.

The underlying rationale behind Zaslav’s cost-cutting strategy centered on turning Warner Bros. Discovery into a cash flow generator. Not only would cash be needed to pay off debt, but Zaslav’s pitch to investors would be to view his company as a shining light in the changing entertainment world — a legacy media company that actually makes real money.

“You should be measuring us in free cash flow and EBITDA [earnings before interest, taxes, depreciation and amortization],” Zaslav said an investor conference run by RBC Capital Markets last month. “We’re driving for free cash flow.”

Zaslav is trying to give Warner Bros. Discovery a head start on what may be a year of downsizing among large media and entertainment companies. His strategy appears clear: Cash generation will coax Wall Street into seeing his company as an industry outperformer. But he’ll need to keep together a company made up of tens of thousands of ex-Time Warner and then ex-WarnerMedia employees who have been through round after round of reorganizations and layoffs.

“It isn’t going to be overnight, and there’s going to be a lot of grumbling because you don’t generate $3.5 billion of operating synergies without, you know, breaking a few eggs today,” Warner Bros. Discovery board member and media mogul John Malone told CNBC in an interview last month.

Cash rules everything

Malone has co-strategized and cheered Zaslav’s effort to focus the company on maximizing free cash flow, which is defined as net income plus depreciation and amortization minus capital expenditures.

“Whenever I talk to David, the first thing I say is manage your cash,” Malone said last month. “Cash generation will ultimately be the metric that David’s success or failure will be judged on.”

Even before Zaslav gave his directive to all of the division heads, the new CEO was already thinking about how to boost cash flow. That was at least part of the motivation to eliminate CNN+ just weeks after it launched, which had a spending budget of about $165 million in 2022 and an eventual $350 million, according to people familiar with the matter.

Warner Bros. Discovery owns streaming services, linear cable networks, a movie studio, a TV production studio and digital properties. It owns DC Comics, HBO, CNN, Bleacher Report, and oodles of reality TV programming. It has sports rights both internationally and domestically, including the NBA on TNT.

Zaslav hopes his reconstruction of Warner Bros. Discovery will deliver two results. First, it will showcase the company as a fully diversified content machine, featuring top brands and intellectual property in prestige TV (HBO), movies (Warner Bros.), reality TV (Discovery), kids and superheroes (Looney Tunes, DC), news (CNN) and sports (NBA, NCAA March Madness).

Liberty Media’s John Malone

Michael Kovac | Getty Images

Second, he wants it to prove that a modern media company that’s spending billions on streaming video can also generate billions in cash flow. The company has estimated 2023 EBITDA will be $12 billion. Warner Bros. Discovery will generate more than $3 billion in free cash flow this year, about $4 billion next year and close to $6 billion in free cash flow in 2024, according to company forecasts.

That would give Zaslav a selling point to investors compared to other legacy media companies. Disney has generated just $1 billion of free cash flow over the past 12 months and analysts estimate the company will have about $2 billion in 2023. That’s despite growing Disney+, its flagship streaming service, by 46 million subscribers during the period and owning a theme park business that generated $28.7 billion in revenue for the fiscal year — up 73% from a year earlier.

The low free cash flow relates largely to the money drain from streaming services and Disney’s large investments in theme parks. Over the past 12 months, Disney had $4.2 billion in operating income from its media properties, down 42% from a year ago. Returning Disney CEO Bob Iger said in a town hall last month he will prioritize profitability over streaming growth — a change from when he left the post in 2020. Outgoing boss Bob Chapek put into place a Dec. 8 price hike for Disney+ and other streaming services to accelerate cash flow.

“Discovery was a free cash flow machine,” Zaslav said earlier this year of his former company, which he ran for more than 15 years before merging it with WarnerMedia. “We were generating over $3 billion in free cash flow for a long time. Now, we look at Warner generating $40 billion of revenue and almost no free cash flow, with all of the great IP that they have.”

Wall Street vs. Sunset Boulevard

When AT&T announced it was merging WarnerMedia with Discovery Communications last year, Zaslav immediately went on a Hollywood “listening tour,” sensing an opportunity to become the new king of Tinseltown. Many Hollywood power players thought Zaslav would dedicate his first year as CEO to currying favor with the industry given his lack of history with scripted TV or movies. He even bought producer Bob Evans’ house for $16 million in Beverly Hills, a sign some thought meant he wanted to be Hollywood’s next mogul.

A year later, Zaslav isn’t the king. In fact, many consider him a villain.

It turned out Zaslav’s top priority as CEO of a large public company wasn’t to win over Hollywood. Rather, it was to convince investors his company could survive and flourish as a relative minnow against much larger sharks, including Apple, Amazon, Disney and Netflix, in an entertainment world that’s quickly moving to digital distribution.

Zaslav’s focus on investors before Hollywood makes business sense. The company must be financially sound before it can make big investments. But he’s taken a hit, reputationally, with some in the creative community.

“HBO Max is widely acknowledged to be the best streaming service. And now the execs who bought it are on the verge of dismantling it, simply because they feel like it,” tweeted Adam Conover, the creator and host of “The G Word” on Netflix and “Adam Ruins Everything” on HBO Max, in August. “Mergers give just a few wealthy people MASSIVE control over what we watch, with disastrous results.”

One Hollywood insider who met with Zaslav to give him advice before he stepped into the job said the Warner Bros. Discovery CEO has ignored 90% of his advice on how to manage the business.

Time will tell whether Zaslav’s year-one decisions have lasting ramifications with a spurned Hollywood community. Critics of Iger at Disney initially said he lacked “creative vision” when he first took over as chief executive nearly two decades ago.

Zaslav can counter that Warner Bros. Discovery hasn’t decreased content spending. The company spent about $22 billion on programming in 2022. But he’s also made cost consciousness a point of pride.

“We’re going to spend more on content — but you’re not going to see us come in and go, ‘Alright, we’re going to spend $5 billion more,'” Zaslav said in February. “We’re going to be measured, we’re going to be smart and we’re going to be careful.”

The company’s content decisions have been based on strategic corrections, such as eliminating made-for-streaming movies and cutting back on kids and family programming that don’t materially entice new subscribers or hold existing ones, executives determined. Warner Bros. Discovery’s HBO continues to churn out hits, including “White Lotus,” “Euphoria,” “House of the Dragon” and “Succession,” under the leadership of Casey Bloys.

V Anderson | WireImage | Getty Images

‘We don’t have to have the NBA’

Perhaps Zaslav’s biggest dilemma is what to do with the NBA.

Like other media companies, Warner Bros. Discovery rents the rights to carry games and pays billions to leagues for the privilege. Warner Bros. Discovery currently pays around $1.2 billion per year to put NBA games on TNT. In 2014, the last time the league struck a deal with TNT and Disney’s ESPN, carriage rights rose from $930 million to $2.6 billion per year.

Negotiations to renew TNT’s NBA rights will begin in earnest next year. Zaslav has said he has little interest in paying a huge increase just to carry games again on cable networks — a platform that loses millions of subscribers each year.

“We don’t have to have the NBA,” Zaslav said Nov. 15 at an investor conference. “With sport, we’re a renter. That’s not as good of a business.”

The problem for Zaslav is keeping legacy pay TV afloat may be his best way to keep cash flow coming, and putting NBA games on TNT may be his best chance to do that. In the third quarter, Warner Bros. Discovery’s cable network business had adjusted EBITDA of $2.6 billion on $5.2 billion of revenue. That’s compared with a direct-to-consumer business that lost $634 million.

If Warner Bros. Discovery is going to pay billions of dollars a year for the NBA, Zaslav wants a deal to be future-focused. He has the luxury of having NBA Commissioner Adam Silver’s ear for the next three years because the NBA will be on TNT through the end of the 2024-25 season.

“If we do a deal on the NBA, it’s going to look a lot different,” Zaslav said.

Charles Barkley on Inside the NBA

Source: NBA on TNT

Warner Bros. Discovery knows how to produce NBA games and airs a studio show, “Inside the NBA,” which is widely regarded as the best in professional sports. It’s possible Zaslav could strike a deal with another bidder, such as Amazon or Apple, which may allow Warner Bros. Discovery to produce their games while giving him a package of games that came with a lower price tag.

Ideally, Zaslav would like to do sports deals that include ownership of intellectual property. This is also appealing to Netflix, The Wall Street Journal reported last month. Acquiring leagues gets Zaslav out of the rental business. But while smaller professional sports leagues, such as Formula One and UFC, are owned by media companies (Malone’s Liberty Media and Ari Emanuel’s Endeavor, respectively), it seems unlikely NBA owners would agree to sell Warner Bros. Discovery a stake in the league.

Silver said last month at the SBJ Dealmakers Conference he was open to rights deals structured in novel ways.

“We’re in the enviable position right now of letting the marketplace work its magic a little bit, you know, to see where the best ideas are going to come from, what’s going to drive the best value,” Silver said.

It’s also possible Zaslav could walk away from the NBA completely. While “Inside the NBA” co-host Charles Barkley recently signed a 10-year contract to stay with Warner Bros. Discovery, it includes an out clause if Zaslav doesn’t re-up the NBA, according to The New York Post.

Live sports aren’t necessarily essential to most streaming services’ success. Netflix, Disney+ and HBO Max all have zero live sports — at least for now.

The one certainty is Zaslav’s decision will be squarely based on how a deal affects the company’s free cash flow.

“It’s how much do we make on the sport?” Zaslav said. “When I was at NBC, when we lost football [in 1998], we lost the promotion of the NFL, which was a huge issue. Then you have the overall asset value without the sport. So you have to evaluate all that.”

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