Warner Bros. Discovery Not Putting All Of It’s Eggs In One Streaming Basket

Media Warner Bros. Discovery Not Putting All Of It’s Eggs In One Streaming Basket Derek Baine Contributor Opinions expressed by Forbes Contributors are their own. I am Media Forecasting Experts Managing Director, 30 years experience.

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Discover earnings call on August 4 were looking for exciting news about the new streaming service the company plans to debut. However, management quickly turned the tone of the call focusing on how they are one of the leading players in the content business and a diversified media company focused on many different areas. It came as no surprise that Warner Bros.

Discovery WBD announced on their earnings call that they will c ombine HBO Max and Discovery + , however, the company did put out guidance that they plan to grow the service from 92 million subscribers now to 130 million by 2025. They expect cash flow from streaming to be profitable in the U. S.

in 2024 and generate $1 billion in EBITDA in 2025. However, they cautioned that they would “have healthy content investment,” but it would be at a “more measured pace. ” The combined service will debut in the U.

S. in the Summer of 2023 followed by Latin America in early 2024 with additional launches in key Asia Pacific Markets and European markets later in 2024. It has yet to be named, but Jean-Briac Perrette, CEO and President of Global Streaming and Games stated, “”HBO and HBO Max has stood for something which was a very high-quality premium scripted in particular, drama series, they’ve never executed a real brand campaign to define what the new service is.

And as we think about rolling our new service, certainly, we will be coming to market with a big noisy campaign, expanding the proposition with a much, much bigger content offering. ” The company likely is worried about investing in big budget productions for its streaming service after the news it was not releasing two very expensive films (“BatGirl” and “Scooby! Holiday Haunt”) . However, if the streaming service doesn’t spend heavily it will certainly risk losing customers to other platforms like Disney+, Amazon Prime Video, Apple TV+ Netflix and many others.

This idea of expensive films going direct to streaming, we cannot find an economic case for it. We can’t find an economic value for it,” said Zaslav. ” Also on the call, Zaslav noted, “As I’ve said, it’s not about how much, it’s about how good.

Owning the content that really resonates with people is much more important than just having lots of content. In other words, at a time when almost every piece of content ever made is available to consumers across any number of free and pay services, duration, quality brands have never been more important,” he continued. MORE FOR YOU How To Become A Translator CNN’s John Berman: Arizona ‘Sham Audit’ Proves Donald Trump ‘Even Bigger Loser Than The First Time’ ‘Cut Him Off, Cut Him Off Now!’ Newsmax Anchor Ends Interview When Guest Criticizes Donald Trump Another streaming service will launch which will be ad-supported and carry only part of the content available to the consumer, a product which will likely appeal to a younger audience.

However, President and CEO David Zaslav made it clear they weren’t leaving all of their eggs in one streaming basket. Zaslav also touched on the ad market, saying they had achieved low to mid-tee CPM increases during the upfront, with $6 billion in commitments. That’s impressive giving the looming recession.

“Our objective was not only to be one of the top global streaming companies, but also a media company able to drive financial returns by distributing our content on every platform, and our conviction has not changed,” he said on the earnings call. Surprisingly, despite the alarming trend of heavy cord cutting and cord shaving, and a possible advertising downturn (Perette said Q3 global ad sales are expected to decline by high single to low double digits based on current booking trends), Zaslav remains bullish on the outlook for linear networks. “We’re big believers in the linear business.

There is some secular decline. It’s leveled off,” he said. “We have a great team running it.

This is what we do. It’s what we know how to do. We have a team that’s been doing this for 30 years.

If the linear business is a race car, we’ve got a team of race car drivers. And when we hear a noise or its in third gear, we know how to fix it. ” Zaslav said that, “We have a different view on the wisdom of releasing direct-to-streaming films, and we have taken some aggressive steps to course correct the previous strategy.

” Perette echoed this sentiment. “For decades, our industry has embraced changing technology and consumer demand by evolving a very successful windowing approach to exploiting content. However, in recent years, a strategy has emerged that suggest the video business will be better off collapsing all windows into streaming, overpaying for and overinvesting in content and offering it all at the same time for a low price.

We don’t believe in this strategy,” he said. He also mentioned that quite a bit of its product is licensed to third parties and they are assessing this as the model evolves from free-to-air linear to free-to-video streaming. This is not an easy task as each region and each country in each region is moving to broadband and streaming at different paces.

The company also said that management had approved investments and foregone revenue in various parts of the business which will knock $2 billion off of EBITDA in 2022. “Some examples of these business decisions include: “Number one, significant reductions in external content sales. 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,” said CFO Gunnar Wiedendels.

Other issues included limiting HBO Max B2B distribution and substantial investments in kids and animated content for both linear and DTC platforms, as well as investments in original films for HBO Max that didn’t pay off. Films like “Wonder Twins”, “Badger” and “Scoob!: Holiday Haunt” do not fit into their new strategic approach for production of movies for its streaming service. Wiedendels also noted that they had significant incremental and loss-making content investments for the Turner networks, implying a potential shake up at the networks division.

Network revenues were up only 1% in the second quarter while EBITDA fell 11% Despite Zaslav’s bullishness on the linear business, it’s clear that some of the many cable networks owned by the company won’t survive over the long-term. Derek Baine Editorial Standards Print Reprints & Permissions.