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Warner Bros. Discovery just moved up its streaming timeline.
The company previously announced it’d be merging HBO Max and Discovery+ by next summer. However, during an earnings call on Thursday, WBD said consumers could expect a combined streaming offering in the spring. CEO David Zaslav noted that the company has been “very hard at work” toward that goal.
“We can’t wait to make the service available to consumers around the globe and get the business running on all cylinders,” he said during the earnings call. “While our team is hard at work preparing for the launch of our combined offering, we’re also actively experimenting and testing our hypotheses about the future product in large part to address some of the deficiencies of the existing platform.”
As far as subscribers, Warner Bros. Discovery added 2.8 million of them in the third quarter, reaching 94.9 million globally. That’s up from the 1.7 million it added in the previous quarter.
Part of that growth came from a strong content slate, including the debut of the Game of Thrones spin-off House of the Dragon. It was the largest original series premiere in HBO’s history and was the largest series launch on HBO Max across the U.S., Latin America and EMEA.
Zaslav warned that further cost-cutting measures would be coming to HBO Max following a decline in revenue from ad sales. When the WarnerMedia and Discovery merger closed in April, the CEO initially targeted $3 billion in cost-saving synergies—that number has now climbed to $3.5 billion.
CFO Gunnar Wiedenfels is aiming for WBD to become a “leaner” media company, which he said will allow the group to take advantage of the eventual market recovery. Unfortunately, this likely means further layoffs are in store.
A controversial content strategy
In a calmer earnings quarter for Warner Bros. Discovery, Zaslav still managed to ruffle a few feathers with some controversial statements surrounding the merged company’s content strategy.
He emphasized that changes will be coming to the flagship streaming service HBO Max, noting that the company has already made updates to its product user experience and is now experimenting with adding Discovery+ content on the service. However, it will hold off on an active expansion until the new offering launches.
“I believe the grand experiment … is over,” he said. “The strategy to collapse all windows, starve linear and theatrical and spend money with abandon while making a fraction in return—all in the service of growing sub numbers—has ultimately proven, in our view, to be deeply flawed.”
WBD’s priority is now profitability versus driving subscription numbers, a move that differs from many of the company’s competitors.
“Profitability, not purely sub count, is our benchmark for success. While we’ve got lots more work to do and some difficult decisions still ahead, we have total conviction in the opportunity before us,” said Zaslav.
Those difficult decisions included pulling 37 series from HBO Max, which Zaslav said was beneficial to the company.
“We didn’t take one show off the platform that was going to help us in any way. It’s going to help us get it off the platform so that we can now invest with the knowledge of what is working and replace those shows with content that has a chance to be more successful,” Zaslav said.
The CEO sees the company leaning further into franchises, pointing to Game of Thrones, Lord of the Rings, Harry Potter and titles “loved everywhere in the world.”
A license to kill fan-favorite series
Another way to cut costs and make a profit? License out series to AVOD services like Pluto TV and Tubi, according to Zaslav.
“Almost the entire library shouldn’t be on HBO Max and paid for by HBO Max,” Zaslav said. “We have an extraordinary library—Friends, Big Bang Theory, Two and a Half Men—there’s 15 or 20 series that are loved and used and are nourishing the audience on a regular basis. But then there’s a huge number of series and movies that aren’t being used at all.”
And while Zaslav maintains that WBD is still committed to scripted content, he affirmed that the company would not hesitate to cancel series that drain dollars.
“We’re very committed to scripted, but we want to measure what people are watching and what they’re not,” he said. “If a repeat of Two and a Half Men or Big Bang [Theory] does three times the ratings of a brand new show that we’re spending, another season that we greenlit of a show that’s costing us seven and a half million dollars, we’re going to cancel that show, and we’re going to try and get another scripted series that has a chance to really deliver and delight and engage an audience. But we are being deliberate about measuring how the shows are doing.”
The CEO reiterated that the company didn’t “get rid of any show” that helped it.
“It’s a business of failure, but we’d rather take that money and spend it again and have a chance of having a show that will engage and delight on either our traditional platforms or our subscription platforms,” Zaslav said.
And expect to see an increase in the streaming ad load whenever the new service launches. HBO Max currently has two to three minutes of advertisements, about half of what competitors Netflix and Disney+ will offer, while Discovery+ clocks in at double that.
“We have almost 100% growth in the inventory available to us as we look to combine the two ad loads of those products,” JB Perrette, CEO and president of WBD’s streaming and interactive entertainment departments, said during the call.
