“Opportunity” for HBO Max price increase for Warner Bros. Discovery in 2023
HBO Max hasn’t raised the price from $14.99/month over its ad-free tier since the May 2020 launch, noted JB Perrette, president and CEO of global streaming and gaming at Warner Bros. Discovery, during the company’s third quarter earnings call. By 2023, he said, “it will be three years since prices have changed, which we believe is an opportunity, especially in this environment.”
“We think there’s actually a price advantage for us over the ad-free [HBO Max] service and we can probably move north of where prices are today,” Perrette said.
At the same time, Warner Bros. Discovery has advanced its planned US launch of the combined HBO Max-Discovery+ platform to spring 2023a quarter ahead of what it was previously aiming for, CEO David Zaslav said on the call.
Additionally, Zaslav said, WBD will “aggressively attack” the bottom of the streaming market with its own free, ad-supported streaming TV offering (FAST) to launch in 2023. He previously said Warner Bros. Discovery was “exploring” a foray into FAST. “As the company with the largest film and TV library in the industry, we have a unique opportunity to grow our addressable market and drive real value, and we plan to act quickly,” said Zaslav.
Company executives haven’t discussed the price (or name) of the HBO Max-Discovery+ combo. Perette commented that pricing is one of the key elements “that makes us particularly optimistic about the products that come together”, in addition to a “broader positioning that allows us to move from a product that can have a slightly more personalized to fewer people in a household than a product that actually appeals to everyone in a household.
WBD may also raise international prices for its direct-to-home services, Perrette said. “When we look internationally, our wholesale and retail ARPUs [average revenue per customer] are significantly lower than those of the market leaders. And for us, that means opportunity and capability as we think about the new. [HBO Max-Discovery+] product coming to market and even some initiatives before the new product comes to market for ARPU growth internationally.
In the third quarter, Warner Bros. Discovery, which isn’t quietly reporting HBO/HBO Max subs after the WarnerMedia acquisition closes, saw its rolls direct to consumers earn $2.8 million worldwide on HBO, HBO Max, Discovery+ and smaller DTC streamers. In the United States and Canada, the company only added 500,000 subscribers. The direct-to-consumer unit’s EBITDA loss doubled year-over-year from $309 million in the third quarter of 2021 (on a pro forma basis) to $634 million in the last trimestre.
Zaslav appeared to blame weak third-quarter growth in part on “deficiencies” in existing streaming platforms. “The fact that we’ve been able to grow almost 3 million subscribers outside of the US without a lot of promotion and with a platform that’s not that great, we really think that’s encouraging as we let’s start looking at a wider rollout,” he said.
Zaslav cited two examples where the Warner Bros. streaming team. Discovery works to improve the services before they are integrated. First, HBO Max started rolling out an end card after someone finished watching a series that recommends other shows, “an obvious way to drive more consumer engagement,” it said. -he declares. Second, WBD has begun experimenting with bringing Discovery+ content to HBO Max. starting with select Magnolia Network shows such as “Fixer Upper: The Castle,” which he said was one of the top five shows on HBO Max after just a few days on the service. “These first green shoots reinforce 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,” commented Zaslav.
Addressing FAST’s planned launch next year, Zaslav said WBD’s library has “a huge amount of content” that isn’t on HBO Max and isn’t monetized while it’s almost fully written off. “[T]there are always a large number of people who do not want to pay. And we will be able to make them spend time with us, we think with a very advantageous economic model compared to our peers. And then as we learn more, we can move the content into that ecosystem,” he said.
Meanwhile, according to Perrette, WBD was “a bit surprised” that few subscribers switched to the HBO Max With Ads plan ($9.99/month in the US). He said this gives the company confidence that it can increase the price on the ad-free tier and can increase the ad load on the ad-supported plan. Today, HBO Max With Ads runs 2-3 three-minute ads per hour, about half of Discovery+’s ad load. This means that Warner Bros. Discovery will have “almost 100% growth in the inventory available to us as we look to combine ad loads for these two products,” he said.
Discovery of Warner Bros. reported Q3 revenue of $9.82 billion, down 8% year-over-year, and a net loss of $2.3 billion, which included $1.92 billion of amortization of intangible assets related to acquisition and $1.52 billion of restructuring charges, including content write-downs and write-offs.
Restructuring charges for the third quarter included content write-downs of $891 million, organizational restructuring costs of $238 million, other content development costs and write-offs of $377 million and contract termination costs of $15 million.
During the call on Thursday, Zaslav again defended the content write-offs. “We didn’t take a single show off a platform that was going to help us in any way,” he said. Warner Bros. Discovery, he continued, can “now invest with the knowledge of what works and replace those shows with content that has a chance of being more successful… We are now focused on how to deploy that capital of a way to generate real value and get content that doesn’t work. »