JB Perrette, president and CEO of Warner Bros. Discovery Global Streaming and Games, speaks on stage during the Warner Bros. press conference. Discovery Streaming on April 12, 2023 in Burbank, California.
Jeff Kravitz | Getty’s paintings
Though he may be humble, Discovery Warner Bros CEO David Zaslav proved this week that he is definitely a name dropper.
Warner Bros. Discovery unveiled a new streaming service on Wednesday featuring a combination of shows from HBO Max and Discovery+. It will premiere on May 23 in the US, later this year in Latin America, and in the rest of the world in 2024. And it will be called “Max” – without “HBO”.
At first glance, Warner Bros.’s decision to Discovery to drop the HBO Max name is a logical marketing choice. Look deeper and it begins to resemble a microcosm of existential tension that underlies the company – and the media industry in general.
The company is trying to compete Netflix AND Disney be a winner in streaming while delivering a message of financial discipline that de-prioritizes new streaming subscribers. It’s a question of quality and quantity, and Warner Bros. Discovery tries to play both sides.
“Max is where consumers can finally say, ‘Here’s a service that not only has something for everyone in my home, but also something great for everyone in my home,’ said JB Perrette, the company’s head of during the presentation of Max Wednesday in Burbank, California.
HBO Max no longer
Perrette explained on Wednesday why Warner Bros. Discovery removed part of the HBO name from the new service. HBO is synonymous with adult entertainment, and Max will lean towards offering programming for children and families, he said.
“We all love HBO,” said Perrette. “This is a brand that has been built over five decades to set trends in adult entertainment. But it’s not exactly where parents would most easily drop off their kids. Not surprisingly, this category failed to live up to its expectations. real potential in HBO Max.”
In this photo, the Warner Bros. logo Discovery is displayed on the smartphone screen, and in the background the HBO Max and Discovery Plus logos.
Raphael Henry | Light Rocket | Getty’s paintings
Warner Bros. executives Discovery felt the name HBO it actually limited the streaming service’s audience because it scared away potential audiences. They also felt that the HBO brand could be undermined by the deluge of Discovery reality TV shows expected to join the platform, such as “Dr Pimple Popper,” “90 Day Fance,” and various HGTV shows that are more likely to serve as background TV than fare to office conversation about a water cooler.
“HBO is not television. HBO is HBO. It has to stay that way,” Perrette said at the event. “We will not push it to a breaking point by forcing it to accept the full scope of this new content proposal if we kept the name in the service brand. By doing so, we will better elevate and showcase our unparalleled range of other content and branding that will be critical in enhancing the appeal of this enhanced product.”
The company’s reasoning is rational. HBO speaks to a specific audience, but it also doesn’t speak to a specific audience. HBO fans won’t unsubscribe from the service in response to the Max name, but some HBO freaks may now sign up as the adult brand is obscured by a deluge of distinctly non-HBO content coming to the service.
The evolution of streaming
When HBO Max first launched, AT&T and WarnerMedia executives stressed to subscribers that this new app was first and foremost HBO’s home. Now, some 80 million subscribers later, that point is less important. Those who want HBO already know where to find it, and HBO Max will simply turn into Max on most platforms.
Streaming is entering its “teenage” years, Perrette said, and Max as a name makes more sense to continue adding global subscribers in a world of shorter stature.
It would be the end of the story if the stated goal of Warner Bros. Discovery was to maximize (no pun intended) the number of subscribers who sign up for Max.
That was the goal of every media company when Zaslav agreed to merge Discovery with WarnerMedia in 2021. But according to Zasław, this is no longer a priority.
“I’d rather have 100 million subscribers or 150 million subscribers and make it really profitable than try to rack up some big number and end up losing money,” Zaslav told CNBC’s Julia Boorstin after Wednesday’s presentation. “We look at what people watch on Max and we can see exactly what they like and what they don’t like. Some of the stuff they don’t watch we can put on free AVOD [advertising-supported video on demand] platform and some things they don’t watch, we can keep it exclusively on Max, but we can also sell to others.”
“We’re constantly focused on creating great content and monetizing it in every way possible,” he said.
Media hedge
With a new streaming strategy – with Max at the center – Warner Bros. Discovery hedges its bets.
The company maintains Discovery+ for customers willing to pay $5 or $7 just for Discovery programming. Perrette said the company “doesn’t want to leave any of its profitable subscribers behind.”
Zaslav also referenced Warner Bros.’s free advertising service. Discovery which the company said will come later this year.
Warner Bros. Discovery could also stop HBO Max. For those customers who wanted both Discovery+ and HBO Max, he could offer a bundle at a discounted price. That was the strategy Disney was offering combined ways to mix and match Hulu, ESPN+ and Disney+.
Instead, the company has loaded up one service with everything it has, which could eventually also include news from CNN and sports like NBA or NHL games. Zaslav said on Wednesday he would have more details on the matter “in the coming months.” Don’t forget that Zaslav eliminated CNN+ as a standalone streaming option last year after only a month of existence.
Warner Bros. Discovery builds the Max as an all-in-one option, making it scale enough to hold its own in a post-cable world that’s coming faster and faster.
But Zaslav also tells investors he doesn’t mind limiting Max’s growth. Making money is more important to him than competing with Disney and Netflix for the title of the biggest streamer in the world.
It’s a delicate balance: Disney, Paramount Global, Comcast‘s NBCUniversal and equal Netflix they all fight with the same forces. Investors turned on the narrative of striving for streaming growth at any cost last year, slashing the valuations of many media and entertainment companies by half.
What is happening now is essentially a hedge. The media industry knows that streaming is the future, but its growth has slowed. Zaslav defended the value of the traditional pay-TV package while criticizing the previous WarnerMedia regime’s lavish spending on streaming. Attempts to Give Investors a New Reason to Excite Warner Bros. discovery. Zaslav hopes that the message is to generate free cash flow.
David Zaslav, president and CEO of Warner Bros. Discovery speaks to the media upon arrival at the Sun Valley Resort for the Allen & Company Sun Valley Conference on July 5, 2022 in Sun Valley, Idaho.
Kevin Dietsch | Getty’s paintings
“Ultimately, I’m a free cash flow guy,” Zaslav said on Wednesday. “We want great talent, but ultimately, if we don’t make money from subscriptions, if we don’t have any ARPU [average revenue per user]we are not helping each other and we are not helping shareholders.”
There are some indications that he may be up to something. Warner Bros. shares Discovery is up nearly 50% this year after falling around 60% last year.
But when you take a two-part name – HBO and Max – and keep only Max, the implication is “great” over “quality”.
It was a message from AT&T. So far, this has not been Zaslav’s message.
WATCH: CNBC’s full interview with Warner Bros. CEO Discovery, David Zaslav
Disclosure: CNBC parent company Comcast owns NBCUniversal and co-owns Hulu.