Combined HBO Max and Discovery+ to launch in 2023 as Warner Bros. Discovery rejects AT&T strategy
Warner Bros. Discovery gave more details about its plan to combine streaming services HBO Max and Discovery+ into one offering, as the company seeks a more disciplined strategy to succeed in the streaming wars amid wild speculation about its future.
Executives, speaking with analysts on Thursday, said a merged version of the two streamers will begin to roll out in the U.S. next summer and expand to other countries during the next couple years. The company did not say what the new service would be called.
Comments by executives including Chief Executive David Zaslav amounted to a full-throated rejection of the WarnerMedia strategy under the studio’s former owner, AT&T. Zaslav was blunt in his endorsement of a more disciplined strategy, in contrast with the growth-at-any-costs tactics that became common in the streaming business.
“Owning the content that really resonates with people is much more important than just having lots of content,” Zaslav said during a call with analysts. “In other words, at a time when almost every piece of content ever made is available to consumers across any number of free and paid services, curation, quality and brand have never been more important.”
Combining HBO Max and Discovery+ will be no simple feat, since the services have very different types of content. HBO Max has prestigious TV dramas, DC films and oldies like “Friends.” Discovery+ is known for unscripted home makeover shows and dishy reality programming.
The company anticipates that the combined service will hit 130 million subscribers globally in 2025. Executives also said an ad-based streaming service is in the works. The company expects its U.S. streaming business should be profitable in 2024.
Warner Bros. Discovery reported 92.1 million streaming subscribers for its services including HBO Max and Discovery+, an increase of 1.7 million from the end of the first quarter. In the U.S. and Canada, the company lost about 300,000 subscribers to end the quarter with 53 million. Internationally, subscriptions increased by 2 million to 39.1 million.
In the meantime, the company is embarking on a content-sharing plan for HBO Max and Discovery+.
The company said Thursday it will put original CNN programming on Discovery+ to beef up that streamer’s offering. At the same time, HBO Max is getting content from “Fixer Upper” stars Chip and Joanna Gaines’ Magnolia Network starting next month, in a preview of what the combined streaming service could look like. The Gaines’ new “Fixer Upper: The Castle” will launch concurrently on the Magnolia Network cable outlet, HBO Max and Discovery+ in October.
HBO Max is one of many streaming services trying to compete with Netflix and Disney+. Netflix in July said it lost 970,000 subscribers during its most recent quarter. Paramount Global on Thursday said Paramount+ added 3.7 million subscribers during the quarter to cross the 43-million mark. Disney+ has 138 million subscribers. Walt Disney Co. reports earnings next week.
As Warner Bros. Discovery shifts strategies from the AT&T era, the company’s decisions have proved disruptive for some talent.
Warner Bros. this week canceled the release of the DC superhero movie “Batgirl,” which was designed to be distributed through HBO Max as part of a broader plan to increase subscribers. The $90-million film had completed shooting and was in postproduction, but fell victim to the studio’s new corporate mandate after its merger with Discovery Inc.
The DC film about the superhero sidekick fell short of what the company wanted for its key comic book franchise and no longer fit with the studio’s film strategy, sources said.
Zaslav has been clear in his belief that movies made straight to streaming make little sense financially and that films do better on streaming services after they debut exclusively in theaters. Still, the decision to shelve a substantially completed movie is highly unusual for a studio. “Batgirl” directors Adil El Arbi and Bilall Fallah issued a joint statement Wednesday saying they were “saddened and shocked” by the decision. “We still can’t believe it,” they said.
“Batgirl,” starring Leslie Grace, was commissioned while Warner Bros. was under the control of AT&T and led by WarnerMedia CEO Jason Kilar, who wanted to use original movies to increase HBO Max’s subscriber count. AT&T spun off WarnerMedia, which merged with Discovery in a $43 billion deal that closed earlier this year.
The company also scrapped an animated “Scoob!” sequel that was planned for HBO Max and unceremoniously removed multiple straight-to-streaming films from the service, including Seth Rogen’s “An American Pickle” and Robert Zemeckis’ “The Witches.” The moves sparked much concern among artists worried about the status of their own projects, said talent sources who spoke anonymously to protect relationships.
Zaslav emphasized his belief in the theatrical box office as the best way to make money from movies.
“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.
Referring to the tactic of releasing direct-to-streaming films, Zaslav said “we’re not going to put a movie out unless we believe in it.”
Zaslav, one of the highest paid executives in corporate America, is seeking $3 billion in cost savings from the merger and more layoffs are expected as the restructuring of HBO Max continues.
He’s shown little hesitancy when it comes to mothballing projects greenlighted by his predecessor, as when he quickly killed streaming service CNN+. Last week, the company canceled the TBS political comedy show “Full Frontal with Samantha Bee.”
Warner Bros. Discovery reported second-quarter revenue of $9.83 billion, missing analyst estimates. Wall Street had projected $11.8 billion in sales, according to FactSet data. On a pro forma basis, revenues were down 3% from the combined revenues of the two companies during the same quarter last year.
The media giant reported a loss of $3.42 billion, or a loss of $1.50 a share. Analysts had projected a loss of 23 cents a share. The loss included $1 billion in restructuring charges and $983 million in expenses related to the transaction and integration of the companies.
Shares fell 11% in after-hours trading.
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