The two arms of HBO’s streaming slate will be coming together as one, a desperate move as the company reported some losses thanks to its parent Warner Bros. merger with Discovery that was first announced in 2021.
Following the bombshell announcement that it would be killing the nearly-completed feature film Batgirl, the company now says HBO Max, along with its slate of shows and movies, will soon merge with Discovery+ and its reality programming.
David Zaslav, the head of Warner Bros. Discovery, said in a Thursday investment call they want to be “flexible toward user preferences,” adding “We have no intention of being beholden to any one in particular, or to a specific business model.”
Jean-Briac Perrette, Discovery’s CEO, said that while streaming is a “critical” part of their strategy, there are more consumer segments to milk. The name of this combined service will be announced closer to launch, he said.
“We recognize that both of our existing products have shortcomings,” the CEO said. “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.”
Reuters first reported earlier Thursday that HBO was moving in this direction, based on four anonymous sources familiar with plans. Still, it’s an eye-popping decision considering HBO Max had grown by 3 million subscribers in its first quarter this year. Though the Warner Bros. CEO said they weren’t much interested in chasing subscriber numbers or outspending the competition. Still, in order to placate investors, they promise they’ll see a total subscriber base of around 130 million globally.
The company is also thinking of “doing a Netflix” and plans to craft a free, ad-based subscription tier to go along with the regular subscription service. This new free “ad-light” tier might have a focus on Warner Bros. old library of classic films (FilmStruck Hive rise up). Perrette also said they will re-look at how they license some of their back catalog.
And of course, the CEO said this will help support their ads platform and “increase monetization particularly with our ad light offering.”
The move comes days after Warner Bros. Discovery announced they were killing the anticipated multimillion-dollar Batgirl movie and the world realized it had been removing shows from the HBO Max service for weeks. New executives at the top of both Warner Bros. and HBO are reportedly refocusing away from streaming subscribers and more toward theater profits, which is the opposite direction that many other more traditional film and cable companies have gone since before the covid-19 pandemic. On Thursday, executives avoided specifics of what happened with Batgirl, but said they have a “10-year plan focusing just on DC.”
“Expensive direct to streaming movies… there is no comparison to what happens when you launch a film in theaters,” Zaslav said. “We cannot find an economic case for it.”
Warner Bros. Discovery’s own Q2 earnings showed that its direct-to-consumer subscriptions among HBO Max, Discovery+, and good ol’ HBO was about 92.1 million. The company said it lost over $1 billion from restructuring costs, alongside buying up sports rights. Its $9.8 billion revenue was down 1% compared to the same period last year. Net losses were about $3.4 billion. Execs also said part of these struggles have included the ill-fated CNN+, which didn’t even have the chance to scream before it was axed right out the starting gate.
Considering that Paramount Global and its flagship streaming service Paramount+ announced today that it had added 3.7 million subscribers, Warner’s move is a curious one. Similarly, Hulu is doing quite well for its owner Disney, even outpacing the house of mouse’s own Disney+ in terms of new subscribers.
What’s especially hard on most of these streaming services is competition. Netflix recently showed it had lost subscribers in its second quarter, though not as many as they originally thought they would.
But it all comes at a time of Game of Throne-level machinations at the top of both Warner Bros. and HBO. Bloomberg recently reported that Zaslav has been grilled by lawmakers and advocacy groups over his very white and very male hiring practices.
And not only that, but there are rumors of a George R.R. Martin-esque employee axing coming down the pike for the beleaguered streaming service. The Wrap reported Wednesday that the company planned to layoff 70% of its development business, according to “multiple insiders,” so your mileage may vary on that point. Such a move would involve “gutting HBO Max” alongside cuts at the executive level as well.