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Introduction to diving:

  • Warner Bros. Discovery has announced plans to combine HBO Max and Discovery+ into a single-branded streaming offering in the U.S. next summer, the company’s first full Earnings Conference Call since the merger of the two companies this year.
  • In addition to subscription video-on-demand (SVOD) services, the company is exploring offering parts of its library on a free, ad-supported television (FAST) platform based on calls. Details of all streaming offerings are expected to be revealed at the company’s planned investor day later this year.
  • Warner Bros. Discovery’s combined platform and possible FAST service is expected to further complicate the streaming space, with major players already making plans for an ad-supported tier. HBO Max and Discovery+ had a subscriber base of 92.1 million, up 1.7 million from the first quarter, according to the company. Earnings report.

Dive Insights:

Warner Bros. Discovery has been teasing plans for a combined HBO Max and Discovery+ streaming service since before Discovery acquired WarnerMedia from AT&T, and has kept details close to the vest in both the pre-merger period of the company’s first merger and now in its first full earnings report. the merged company.

The summer 2023 date gives the ad industry some time to prepare for what will soon be a major player in the streaming wars. The timeline will also give Warner Bros. Discovery Channel time to address the shortcomings of both services, noting performance and customer issues with HBO Max and the limited functionality of Discovery Channel in calls.

The company’s Jean-Briac Perrette said: “Our team has laid out a clear roadmap for migrating to a technology stack that leverages much of the core infrastructure of the acclaimed Discovery+ service, as well as the notable advantages of the more mature HBO Max. and important feature enhancements.” CEO and President, Worldwide Streaming and Gaming. “In turn, this will allow us to effectively reduce customer churn, support total revenue and increase monetization, particularly through our advertising light products.”

Warner Bros. Discovery’s new plan is that once the new combined SVOD is firmly established in the market, the FAST service is likely to emerge. While the company currently licenses some of its content to such services, launching a free, ad-supported platform will help the company generate more revenue from its library from consumers facing subscription fatigue. The FAST channel is an increasingly important part of the streaming space and a promising advertising channel for advertisers. According to an LG Ads Solutions report shared with Marketing Dive, nearly half (44%) of FAST channel viewers showed high TV ad acceptance, with 69% saying such channels were more relevant and aligned with their interests.

Offering ad-free, ad-free, and ad-supported platforms is part of Warner Bros.’ exploration strategy focused on consumer choice, rather than a pure streaming strategy revolving around “overpaying and overinvesting in content and offering it all at the same time.” Prices have dropped,” Perrett explained, likely in a blow to rivals like Netflix.

“We believe streaming has multiple global consumer groups, just like traditional TV has for decades. Some are willing to pay a premium for an ad-free experience, others are more price-conscious and willing to pay less with limited advertising, and There’s a sizable third group of people who won’t pay a subscription fee and just want ad-supported entertainment,” he said.

Warner Bros. Discovery is far from the only company seeing opportunities for advertising lights and ad-supported entertainment. Netflix plans to launch an ad-supported tier in early 2023 after recently naming Microsoft its exclusive ad tech and sales partner. Earlier this year, Disney+ also announced plans to launch an ad-supported tier by the end of 2022. The next phase of the streaming wars is expected to present both opportunities and challenges for advertisers already facing a fragmented video landscape.

Total HBO Max and Discovery+ subscribers increased by 1.7 million in the quarter to 92.1 million. The company hopes to make its streaming business profitable by 2024, with a total of about 130 million global users, according to the conference call.

Excluding streaming, Warner Bros. found the company’s ad revenue rose 2%, with strong demand for sports ads partially offset by poor performance in U.S. News, Kids and General Entertainment. The company bills itself as the fifth broadcast network because of its wide-ranging portfolio, mid- to low-end CPM growth, and nearly $6 billion in up-front commitments.

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