5 Things to Know About Warner Bros. Discovery’s New Streaming Strategy for HBO Max

Earlier this week, rumors swirled with speculation surrounding the fate of HBO Max, from the idea that the streamer would shelve all scripted programming to the HBO brand disappearing. As we now know, none of that is true. Warner Bros. Discovery is indeed going to merge HBO Max and Discovery+ into a single streaming service, but that isn’t news. Back in March, CFO Gunnar Wiedenfels confirmed that the company would consolidate Discovery+ and HBO Max into one service, but there was no timeline at the time. On Thursday, Warner Bros. Discovery CEO David Zaslav shed further light on plans for the new streaming service, which includes three tiers, a summer 2023 rollout in the U.S. and a markedly different approach to content. Here are the top things we learned from Thursday’s announcements: 1. A unified service is the focus Discovery+ and HBO Max combined for 92.1 million global subscribers in the second quarter. That number now excludes what the company calls “non-core” direct-to-consumer subscribers, including brands like MotorTrend, Eurosport Player and a few other smaller products. It also excludes unactivated HBO Max subscribers under the AT&T distribution agreement, which WarnerMedia had historically counted. “We have refined our strategy with a clear focus on a combined DTC product,” CFO Gunnar Wiedenfels said. That focus will start with aligning the two separate products on one tech stack. JB Perrette, president and CEO of Warner Bros. Discovery streaming, acknowledges that both streaming services aren’t without their own flaws. “HBO Max has a competitive feature set but has had performance and customer issues. Discovery+ has best-in-class performance and consumer ratings, but more limited features,” Perrette said. “Our team has developed a clear roadmap to migrate onto one tech stack, leveraging much of the core infrastructure of the highly rated Discovery+ service with significant and important feature enhancements of the more-established HBO Max.” The company chose not to break out separate subscriber numbers for HBO Max and Discovery+. In the first quarter of the year, HBO and HBO Max combined to reach 76.8 million subscribers, a gain of 3 million from the quarter prior. Separately, Discovery ended the first quarter of 2022 with 24 million global direct-to-consumer subscribers, which includes subscribers across Discovery+ and other platforms. 2. WBD sees value in HBO Despite all the previous rumors, the new Warner Bros. Discovery remains committed to the HBO brand. Zaslav pointed out that a lot of money is being spent on premium content for HBO and reaffirmed that the company remains committed to that strategy. “We have a huge library of content. And strategically, we are pivoting to the decision of anything that's important to us," he said. "Growing HBO, HBO Max, sitting down with [HBO and HBO Max head of content Casey Bloys], sitting down with JB, going through the data." While the HBO name is a “crown jewel” of the company, that brand might not be in the new name of the streaming service. “HBO will be the beacon and the ultimate brand that stands for the best of television quality, so that remains unchanged in any scenario in our mind, whether it's in the name or not,” said Perrette. Warner Bros. Discovery Closes Upfront With Nearly $6 Billion in Commitments 3. An updated content strategy A slide from the presentation highlighting the differences between HBO Max and Discovery+’s audience made the rounds on Twitter for saying HBO Max “skews male” and Discovery+ “skews female.” Though not originally intended for meme fodder, the slide shows that the differences between the streaming services has caused the company to reevaluate the content it chooses According to Wiedenfels, Warner Bros. Discovery is looking to migrate to a “more holistic content monetization model” globally, aiming to generate revenue while protecting key franchises such as Big Bang Theory and Game of Thrones. “As part of a corporate initiative to prioritize HBO Max growth globally, new content licensing deals to third parties were largely halted and content was, in general, made exclusive to HBO Max. This is, of course, an upside opportunity over time as we wrap initiatives back to a balanced level of monetization, depending on relative value contributions,” he said. Wiedenfels also shed light on some of the company’s recent decisions, including shelving the Batgirl and Scoob films, pointing to opportunities to “course correct” from previous management. According to Wiedenfels, the company is reevaluating kids and animation content and completed or in-progress projects for both linear and DTC platforms to understand if there's an adequate investment case for them. "Wonder Twins, Batgirl and Scoob! Holiday Haunt are examples of streaming films that do not fit this new strategic approach," Wiedenfels said. But even though the company shelved Batgirl, it still says it’s committed to the DC Universe. Zaslav said that the Warner Bros. film group has “fantastic IP” and great history. “Our ambition is to bring Warner back and to produce great, high-quality films,” Zaslav said. “As we look at the opportunities that we have, DC is top of the list for us." Zaslav described the approach as a "reset." “We've restructured the business where we're going to focus, where there will be a team with a 10-year plan focusing just on DC,” he added, comparing it to Disney’s plan with Marvel. HBO Max and Discovery+ Will Merge Into a Single Streaming Service by Summer 2023 4. It’s moving FAST The new streaming offering will have two tiers: a paid, ad-lite tier and a more expensive ad-free option. There's also the potential for a free, ad-supported TV (FAST) offering, which would be a different product that's similar to a Pluto or a Tubi. “Once our SVOD service is firmly established in the market, we see real potential and are exploring the opportunity for a FAST or free ad-supported streaming offering that would give consumers who do not want to pay a subscription fee access to great library content, while at the same time serving as an entry point to our premium service,” said Zaslav. Perrette added that the content the company is looking to put on the FAST service is not necessarily content that would fit on the more premium product, and the company will also assess market by market. There’s no word on what pricing for the new streaming service will be or even what the name is. 5. A traditional film window In 2020, WarnerMedia (now Warner Bros. Discovery) chose to simultaneously release the studio’s entire 2021 theatrical slate on the streamer as the movie business continued to struggle due to the pandemic. While that was only ever going to be a one-year plan, Zaslav reaffirmed the company has no intentions of going back to it. “We will fully embrace theatrical, as we believe it creates interest and demand, provides a great marketing tailwind and generates word of mouth buzz as films transition to streaming and beyond,” he said. Moving forward, Warner Bros. Discovery will have a traditional film window before moving to PVOD (premium video on demand). After that, projects will finally land on streaming. “This idea of expensive films going direct-to-streaming, we cannot find an economic case for it. We can’t find the economic value for it, and so we’re making a strategic shift as part of that,” Zaslav said. “Our focus will be on theatrical, and when we bring the theatrical films to HBO Max, we find they have substantially more value.” That’s a different approach from legacy WarnerMedia’s strategy and from competitors such as Paramount. During Thursday’s earnings call, Paramount CEO Bob Bakish pointed to blockbuster films that landed on Paramount shortly after theatrical release as big drivers for the company’s streaming service Paramount+. “Their success demonstrates that our strategy of a big theatrical release with a fast follow to streaming is by far the most effective way to maximize the return on our investments in movies,” Bakish said. And hey, it’s working for Paramount. The streaming service added nearly five million subscribers last quarter.