When WarnerMedia CEO Jason Kilar announced in April that he would leave the company after its merger with Discovery was completed, he promised to gift staffers with photos he’d taken during his frequent walks around the Warner Bros. Studios lot. At the time, the workforce that Kilar had led through the pandemic was largely optimistic about the future under new leader David Zaslav, partly because the $43 billion deal he engineered would move the company out from under the telecommunications giant AT&T. Here was a leader who had worked in entertainment for decades, and had even bought the Beverly Hills house once owned by the late Robert Evans. 

But by the time Kilar’s gifts—photos of the studio's iconic water tower, among other things, accompanied by a note extolling his “talented, world-class team”—made their way to employees’ mailboxes earlier this month, the tenor had shifted, according to interviews with multiple insiders. In his first few months as CEO of the new behemoth Warner Bros. Discovery, Zaslav—or DZ, as he’s known to staffers—has installed many of his most loyal Discovery lieutenants atop the company, leaving senior WarnerMedia executives with almost no choice but to seek jobs elsewhere. He’s also made quick work of his promise to slash the company’s $50 billion-plus in debt, shelving DC film Batgirl, pulling little-watched shows and movies from HBO Max, and beginning a series of rolling layoffs that insiders expect to continue through the end of the year.

Zaslav has promised to prioritize theatrical releases for Warner Bros. movies and to focus on fiscal responsibility over streaming growth, but investors are skeptical so far: The company’s stock has lost more than 50% of its value since the merger closed. And though Zaslav plans to hire a new leader to shepherd the next era of DC superhero films—and is preparing to merge Discovery+ and HBO Max into a superservice next year—an executive at the company says optimism is no longer trickling down to employees, who are struggling with low morale and shaky nerves because of the expected layoffs. “The future doesn’t feel important,” says the exec. “Everybody is totally drained and feels burnt out.”

All of Hollywood is feeling agitated at the moment, of course. The town appeared to be emerging from the nightmarish uncertainty of the pandemic until Netflix’s early-2022 subscriber losses forced every major company to question whether the expensive win-at-all-costs mindset that had ruled the streaming wars still made sense—or ever did. Suddenly, the one-time Wall Street darling was laying people off, and executives were touting their reined-in spending. And that was before fears of a recession ratcheted up.

Former Disney CEO Bob Iger couldn’t resist noting the jitters in the air when he sat down for an interview with Kara Swisher at the recent Code Conference gathering of media and tech executives and politicians. “Right now, in the media and entertainment space, is the age of great anxiety,” Iger said, with his relaxed demeanor and retirement stubble no doubt making some execs in the audience jealous. “People who are running these big companies are anxious. Even streaming companies are anxious. Investors are anxious. Advertisers are anxious. The creative community is anxious. Agents are anxious. Everybody’s anxious. They’re anxious because this is an era of great transformation and there are still a lot of unknowns.” 

Those unknowns are particularly obvious at Warner Bros. Discovery, where the insiders say they’ve been feeling unmoored as they await clear guidance from leaders. The new regime is still in the midst of merging two companies—which combined have about 40,000 employees—with distinct portfolios of entertainment assets, including HBO, CNN, Warner Bros. Studios, Animal Planet, TLC, HGTV, and the Oprah Winfrey Network, among other properties. For the Warner Bros. staffers who have thus far survived the merger, it’s been a period of particular “whiplash,” according to the exec, as Zaslav and his team very publicly reverse the streaming-first business strategy set forth by Kilar.

Aside from a few bright moments—the hiring of veteran film execs Michael De Luca and Pamela Abdy to run the film studio, locking HBO chief Casey Bloys into a new five-year contract, and a tour de force showing at the Emmys—what the Warner Bros. Discovery leadership has been focusing on is the unpleasant cost cutting that accompanies major mergers. In addition to shelving Batgirl and removing from HBO Max titles such as the HBO drama series Vinyl and the Robert Zemeckis movie remake The Witches, Zaslav has also shuttered fledgling streamer CNN+, killed an ambitious (and expensive) series in development from J.J. Abrams, and largely scrapped plans to air scripted programming on basic cable networks TNT and TBS going forward. There has also been the steady drip of layoffs, including roughly 70 people who worked for HBO Max, in particular those on the reality and live-action family programming teams, and about 100 ad sales executives. “He’s a slash-and-burn guy,” a top talent rep says of Zaslav, who built a reputation at Discovery for running a lean operation.

All this change is making it hard for anyone at the company to get work done, sources say. The situation couldn’t have been helped by a recent Hollywood Reporter story suggesting that another merger, perhaps with Comcast’s NBCUniversal, might lie ahead. For what it's worth, Zaslav refuted the idea in a virtual town hall with staffers on Wednesday morning, telling them, “We are not for sale,” according to a person who attended the meeting. He also used the meeting to allay concerns among his employees, letting them know that the integration of the companies—which is happening by division as each leader reorganizes their team and sets their new org chart—should be mostly behind them by the end of the year, says the attendee. 

The changes at Warner Bros. Discovery are being felt by the creative community. “We’re already hearing from artists who have shows and movies there,” says the rep. “They’re cutting everything back.” That includes at Discovery+, where a producer who regularly pitches the streamer says there has been a holding pattern of late: “Since the merger, they have not bought anything. My instinct is that it’s the year of the pause.”

At HBO Max—where dealmaking naturally slowed across many divisions as execs awaited postmerger instructions—buying has also been anemic, say three people who do business with the streamer. That’s in part because the August layoffs diminished the nonfiction and live-action family divisions. “A lot of us are in mourning about what’s happening over there,” says a top TV agent who had become accustomed to the frenzied pace of buying for HBO Max during its first two years in operation, which resulted in hits like The Flight Attendant and Hacks. Though the HBO Max and HBO teams have now been largely consolidated, a person with knowledge of the situation tells Vanity Fair that there is no shift in strategy. That suggests that any slowdown in buying is a temporary response to the broader transition at the company.

Assuming that buying does return in full, the needs of the new combined streamer are likely to be different. While HBO is expected to remain a home for prestige dramas, comedies, and buzzy docuseries, an agent says HBO Max’s appetite now feels more “surgical,” pointing to the project The Penguin, in which Colin Farrell will reprise his role as the DC villain, as an example of “spending on things that they have reason to believe will perform”—a.k.a. stories based on existing IP.

Despite the high anxiety at Warner Bros. Discovery, most sources believe that Zaslav is doing what he has to do by ushering in an age of relative streaming austerity. Even critics acknowledge that the heavy spending at HBO Max under the previous regime wasn’t sustainable. “He’s not wrong that we needed to have a more thoughtful strategy around content monetization,” says the Warner Bros. Discovery executive. But that doesn’t make this period of turmoil any easier. Across the industry, people are waiting for all kinds of other shoes to drop, including a recession or another writers strike. “You don’t know what’s around the corner,” says the second agent. “It’s a weird time.”