Warner Bros. Discovery (NASDAQ: WBD) is anticipating a significant surge in its Max streaming platform, with CEO David Zaslav announcing the expectation of over 6 million new subscribers in the third quarter. This growth, Zaslav emphasized, is driven by international expansion and strategic bundling with Disney+ and Hulu.
Speaking at the recent Goldman Sachs Technology Conference, Zaslav highlighted that Warner Bros. Discovery’s relaunch of Max last May, with an expanded programming lineup, has started to pay off. “We’re starting to scale, and in the second half of the year, you’ll see real revenue growth driven by real subscriber growth,” Zaslav stated.
The company’s move to extend Max to Europe in May, ahead of the highly anticipated Olympic Games in Paris, has significantly boosted its international appeal. “We’re available in a lot of Europe and Latin America, and within two years, we’ll be available in most of the world,” Zaslav added.
Max, which includes premium content from HBO along with popular programs from HGTV, the Food Network, and the Discovery Channel, has also benefited from a strategic bundling effort. Zaslav noted that the recent bundling with Disney+ and Hulu contributed to the service’s impressive subscriber increase this quarter. This multi-platform approach is seen as a way to reduce churn and increase average revenue per user.
In a parallel development, Warner Bros. Discovery announced a multi-year renewal deal with Charter Communications (NASDAQ: CHTR) to integrate Max and Discovery+ into Charter’s streaming hub, Spectrum TV Select packages. This marks a significant step, as it’s the first time HBO programming will be available within a standard cable bundle without an additional charge.
Addressing the company’s position post-merger, Zaslav reiterated the strength of Warner Bros. Discovery’s extensive content library, which includes franchises like “Harry Potter,” “Superman,” and “Game of Thrones.” The CEO affirmed, “We’re a storytelling company at our core, and we own some of the most recognized franchises worldwide.”
However, WBD is navigating challenges, including a $9.1 billion charge in the second quarter linked to the write-down of linear assets and the potential loss of its NBA rights package. The company had recently failed to secure an exclusive deal with the NBA, as the league’s games were split among Disney/ESPN, Comcast/NBCUniversal, and Amazon Prime Video. Despite this setback, Zaslav expressed optimism about the company’s future in sports programming.
Zaslav underscored the company’s commitment to scaling its direct-to-consumer (DTC) business, projecting a $1 billion increase in EBITDA next year. WBD’s third-quarter earnings are scheduled to be announced on Nov. 7, with investors closely monitoring progress amid a stock price that’s down 36% year-to-date.
INSIDER TAKE
\Warner Bros. Discovery’s projected addition of over 6 million new Max subscribers in Q3 signals an ambitious drive to expand its global reach and solidify its position in the highly competitive streaming landscape. CEO David Zaslav’s vision of a streaming market consolidating to only five or six major players is a crucial insight, suggesting Warner Bros. Discovery’s intent to be a dominant force as the industry shifts towards fewer but more powerful entities. This foresight positions WBD to leverage its extensive content library, international reach, and strategic partnerships to capitalize on this expected consolidation.
By leveraging its rich content and forming strategic bundling partnerships with industry giants like Disney+ and Hulu, the company is taking a proactive approach to reducing subscriber churn and enhancing user experience. This bundling strategy addresses the common challenge of navigating multiple streaming services, potentially providing WBD with a stronger foothold in retaining and attracting subscribers.
The recent deal with Charter Communications further strengthens WBD’s distribution strategy, potentially allowing Max to reach a broader audience through traditional cable packages—an innovative approach to accessing a market segment that might not typically subscribe to streaming services independently. Notably, this marks the first time HBO programming will be included in a standard cable bundle, demonstrating WBD’s adaptability in distribution methods.
However, the looming question of the NBA rights deal raises concerns about how Warner Bros. Discovery will maintain its relevance in sports broadcasting, a critical component of its linear TV business. The outcome of this ongoing challenge will likely impact WBD’s ability to maintain momentum, especially as the streaming sector faces increasing consolidation and competition.
Overall, Warner Bros. Discovery appears to be positioning itself to navigate the turbulent waters of streaming consolidation, with its aggressive international expansion, strategic partnerships, and strong content library giving it a competitive edge in this evolving landscape. The company’s success will depend on its ability to capitalize on these strengths and adapt to the industry’s rapidly changing dynamics.
