Warner Discovery’s rocky future

Over Warner Discovery’s Q2 earnings call, the new media behemoth announced plans to merge HBO Max and Discovery Plus as a single service in 2023. While we’ve got a solid year to evaluate if CEO David Zaslav’s bet will be a financial hit, early signs are worrisome.

Sticking to safe, proven programming was always what I expected from the new, post-Netflix dip “content perspective” era. But early signs point to Zaslov and his team taking Warner Discovery into extreme, creatively bankrupt directions. Their actions risk driving away their existing subscriber base.

On the day of the earnings call, low performing TV series and movies disappeared off HBO Max to save residuals. Zaslav and friends also canceled a nearly finished $90 million superhero movie – Batgirl – as a tax write-off. A tone deaf presentation simplified HBO Max as “male skew” when some of the service’s biggest breakouts like Hacks and The Flight Attendant reach much broader audiences.

Add Zaslav’s background as the top dog for almost exclusively cheap, unscripted reality show programming for many years. The writing is on the wall: this is just the start of drastic slash and burn tactics for programming that isn’t an ultra safe, proven hit. It may not have been to everyone’s taste, but HBO Max took some risks on shows like Station Eleven and How To With Jon Wilson. Today you can still browse through Studio Ghibli films and a rotating selection of Turner Classic Movies, a catalog with one of the largest collections of pre-1960s cinema. Those days are over.

Warner Discovery’s new service will also have an uphill battle gluing together the widely different content from HBO Max and Discovery under one roof. While I get the surface level appeal around discovery (fans of Succession could fall in love with 90 Day Fiance!), executives’ hubris won’t make the algorithms any better. These services’ home page always buries content, and most recommendations are poor. Because the mega site’s content is so diverse, there’s a higher chance of recommendations making a big miss. Suggesting Barry for Euphoria fans has less chance of annoying its audience than pushing HGTV’s House Hunters.

With general subscription fatigue, the loss of a clear marketing pitch for the unconverted by Warner Discovery is an additional risk. Adding Discovery dilutes the brand for those not bought into HBO’s current programming. Meanwhile, I see deep pocketed streaming solutions as only getting more focused in the future: Apple TV is increasingly turning into the next mini HBO, spending big money on new drama series. Paramount plus has carved out a niche for sci-fi. Disney Plus has Marvel and Star Wars locked up.

We also can’t lose sign of the price tag on this new Warner Discovery experience. I suspect it will only anger their existing audience. Discovery only fans see an eventual price doubling, and even the existing HBO Max audience may feel slighted.

I doubt the ad-free version will be cheaper than $15. It’s a price in the ballpark of competitors Netflix and Hulu while also matching what HBO Max charges today. I can’t imagine already price conscious leadership would see the HBO Max and Discovery combined product as somehow worth less value than one standalone. Depending on C suite’s confidence, they may set a monthly price higher than $15. For subscribers only there for Game of Thrones and Succession, that’s a bitter pill to swallow, paying a surcharge for carrying fees on Discovery.

Let’s take the counterargument to my gloomy outlook: Warner Discovery still has exclusivity on the biggest brands, including Game of Thrones, Batman, and various reality TV series. The biggest financial opportunity is in middle America, with millions of households on the verge of cutting the cord or otherwise open to spending more on subscription services. With enough content that appeals to this audience and drastically slashing costs elsewhere (e.g., kids and family programming, international movies), Warner Discovery can thread the needle and succeed in a crowded streaming market.

The flaw with this positioning is it crowns branded content as enough. Take disparate hit shows and movies, shake them in a blender, cut the rest, and count the profits. As we’ve learned from Netflix’s earnings dip, a strategy of all things for all people isn’t a guaranteed winner. The algorithms won’t suddenly prop up discovery. Sometimes the cuts are deep to annoy a service’s most enthusiastic audience. Customers are price sensitive and will take their money elsewhere. A rebranded Warner Discovery in 2024 keeps marquee TV series and movies to watch, but its numbers stall in the face of increased competition.