While reading some news on the removal of many shows from HBOmax and layoffs the answer of why I came across the most is that the new CEO has to prove his worth by making as much profit right now (right after getting the job) no matter how it will impact the long term profits. The shareholders must be aware of this (at least one would expect them to be), why would they be happy with making 2X now and X later (short term priority) instead of X now and 4X later (long term priority)?

  • "Present value of future payments" would give preference to short-term payments even if risk were not a factor.
    – Ben Voigt
    Oct 21, 2022 at 15:37

4 Answers 4


Warner Bros Discovery is not a growth stock/company; they're a company that consolidated because they did not feel growth was a likely result of their current position.

As such, shareholders absolutely want positive short-term actions, because they don't feel long term is likely to be high growth - or even positive at all, perhaps.

This is common after mergers between mature companies where the merger is not because one is trying to growth (growth by acquisition) but rather because one or both companies feels they need to sell in order to realize current value.

Certainly, if they were confident they could make 10% or 15% return per year for the longer term, they wouldn't make choices to risk that for 10% or 15% short term value. They don't feel that way, hence the contraction.

Also consider that a 10% today return is pretty good - investors that are not long-term investors are interested in maximizing total return over the time period. If they get 10% this year from Warner Bros Discovery, then invest that in something else, they may well get their high over time return - they don't really care if the company is successful long term. Short term is more valuable as it can be turned into more money.


It's not a choice between 2X now and 4X later. Investors will want a CEO to increase current profits by investing less in the future when they think those investments are earning poor returns. And if that is the correct strategy, it will increase future profits because they'll have higher profit margins.

Now, this doesn't mean Warner Brothers Discovery is cutting all investments. In fact, one of the stated aims is to "declutter" their service by eliminating rarely watched content to make room for new Discovery content, which should make it more valuable if that attracts more viewers and more viewings. Essentially when you browse and search HBO Max, you'll see more compelling content and less older content that very few people watch.

They will also try to sell or license the shows they cut to other companies. But mainly this will lower their costs without reducing viewership because the content they cut had such low viewership.


As Yogi Berra is reported to have said, "It's tough to make predictions, especially about the future."

While investors and management should ideally give precedence to long-term goals, it's difficult to be confident that they'll be achieved. Investment portfolios always warn that "past performance is no guarantee of future returns", but in practice we often have nothing better to go by.

In the specific case of a new CEO, we don't even have past performance. We might use their achievements in previous positions as a guideline (those same qualifications went into how they were chosen for this role, after all). But once they take the position, they really need to prove their worth. They could try to explain why their plans will work out in the long term, but "talk is cheap"; investors will usually want to see some benefit soon to decide whether it's worth keeping their money in that company.

Exceptions are start-up companies, which are still in a growth phase and not expected to generate immediate returns.

It would be nice if we could get rid of all this short-term thinking. Consider all the companies whose products contribute to climate change. Many of them could try to shift to more climate-friendly products, e.g. oil companies could go into the wind farm or solar energy businesses. But big changes like this are extremely risky -- why would you expect experts in oil refining to know how to operate a wind farm successfully? Maintaining the status quo is usually a no-brainer.


In your example, consider that investors are not bound to stick with an investment - they can take 2X now, and next year go to another stock and take another 2X (or even 4X if any company stuck with the idea you proposed).
In other words, the optimal strategy is to pick the company with the highest short-term expectation, and then switch as needed.

Companies of course know that and adjust their strategies accordingly.

  • 1
    But share prices don't only reflect current profits - they also reflect expectations of future profits. So wanting short term share price growth doesn't have to mean wanting the company to make a short term profit. See the many tech companies that went without profits but with share price growth for their first several years.
    – bdsl
    Oct 21, 2022 at 11:43

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