WBD to hasten launch of HBO Max-Discovery+ streamer, Zaslav defends cuts

Warner Bros Discovery (WBD) is accelerating the timeline for the launch of its combined HBO Max-Discovery+ streaming service.

David Zaslav

During its third-quarter earnings call on Thursday, president and CEO David Zaslav said the media giant will now launch its joint streaming product in the US in spring 2023 rather than summer. After the US, it will roll out in Latin America, Europe and Asia-Pacific, although proposed launch dates were not given.

WBD added 2.8 million subscribers in the quarter across all of its direct-to-consumer (D2C) platforms, including HBO Max and Discovery+, to reach 94.9 million subscribers globally.

Overall revenue was US$9.82bn in the third quarter, below Wall Street expectations, and the company also reported a heavy net loss of US$2.3bn, which included US$1.9bn of pre-tax amortisation from acquisition-related intangible assets and US$1.5bn in restructuring charges.

When the combined streaming product is launched, Zaslav said he expects to see a “healthy inflection” in terms of subscriber numbers. In the meantime, WBD has been testing how Discovery+ programming performs on HBO Max.

Zaslav said WBD is “actively experimenting” by placing select shows from Magnolia Network on HBO Max, including Chip and Joanna Gaines-fronted renovation series Fixer Upper: The Castle. According to Zaslav, it became a “top-five show” after only a few days on the service.

“These early green shoots bolster our strategic thesis that the two content offerings work well together, and when combined should drive greater engagement, lower churn and higher customer lifetime value,” he said.

Elsewhere, WBD said it plans to increase its synergy targets stemming from the merger of Discovery and WarnerMedia. Initially, the goal was to find US$3bn in savings, but WBD said on Thursday it will look to achieve around US$3.5bn.

There have already been deep cuts across the company, and the revelation that WBD will find an additional US$500m in synergies likely means that those will continue. Even before Thursday’s announcement, it was widely expected that there would be significantly more layoffs and project cancellations expected before the end of the year.

The depth of the staffing cuts and project cancellations has drawn criticism from many within the industry. On Thursday, Zaslav said he has heard the critics but defended the business rationale and stressed the pressing need for change.

“There’s been a lot of views about what’s going on and the remix of this company coming together – and it is messy, it’s challenging. But it’s taken real courage to restructure this company. It hasn’t been restructured and reimagined for the future in a decade-and-a-half,” he said.

The cancellation of the Batgirl movie, which had already been shot, drew intense criticism from the creative community, as did the decision to pull dozens of shows off HBO. It was also confirmed on Thursday that the reboot of Canadian teen series Degrassi has been scrapped.

Zaslav was unapologetic as he said that WBD is, in many ways, going back to the drawing board to figure out what shows work best for audiences.

“All those write-offs, where we took shows off these platforms, we didn’t take one show off a platform that was going to help us in any way,” he said. “It’s going to help us to get it off the platform, so that we can replace those shows with content that has a chance to be more successful. We’re reallocating the capital.”

The WBD principal also took a thinly veiled shot at Netflix and others that employ SVoD-centric business models. WBD’s goal, he said, is to operate in a mixed economy, using various streaming and traditional economic models, and offer a mixture of scripted, unscripted, sports and news.

“I believe the grand experiment, chasing subs at any cost, is over,” he said. “Let’s face it, 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 subscriber numbers, has ultimately proven, in our view, to be deeply flawed.”