Digital Transformation Mergers and Acquisitions Future of TV

Warner Bros Discovery to merge HBO Max and Discovery+

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By Kendra Clark | Senior Reporter

August 4, 2022 | 6 min read

On an earnings call today, leaders at the entertainment titan expressed hope that combining its streaming services will “delivery quality” to consumers and help drive both subscriptions and engagement.

Newly-formed entertainment and media giant Warner Bros Discovery today filed its second-quarter financial results.

The company has confirmed widespread speculation that it plans to consolidate its two subscription video on-demand (SVOD) offerings, HBO Max and Discovery+, beginning next summer. The corporation will offer both an “ad-lite” and an ad-free version of the service in markets around the world. The move follows the merger of WarnerMedia and Discovery in April – a deal that fundamentally restructured the media and streaming landscape.

Warner Bros logo

Warner Bros Discovery reported its Q2 earnings Thursday afternoon / Adobe Stock

On a call with investors this afternoon, Discovery International president and chief executive Jean-Briac Perrette said of the decision: “The combination of HBO Max and Discovery+ could not come at a better time, as both are enjoying strong momentum. HBO Max has emerged as the most acclaimed streaming service among consumers, and Discovery+ remains one of the top-rated apps and the dominant leader in real-life entertainment.”

Perrette went on to explain that while both apps have different content offerings and see different types of engagement, the two offerings are “complementary” and can help attract new subscribers while also driving retention rates. Pairing the services’ unique strengths with the company’s global brands and franchises, the exec said, “is truly an unprecedented combination” that consumers will “trust ... to deliver quality.”

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Ahead of the official launch of the combined services, Warner Bros Discovery will roll out what Perrette called “interim initiatives” including content-sharing across HBO Max and Discovery+. Discovery+ on August 19 will debut a new CNN Originals hub where viewers can stream CNN programs including the Anthony Bourdain collection and Stanley Tucci’s Searching for Italy. Beginning later this year, HBO Max will host some of the lifestyle programs within the Magnolia Network portfolio. The company believes content-sharing will help drive awareness around both unique titles and streaming products.

Plus, before the combined offering is released, Warner Bros Discovery aims to focus on improving the product and technology. “We recognize that both of our existing products have shortcomings,” said Perrette today. “HBO Max has a competitive feature set but has had performance and customer issues. Discovery+ has best-in-class performance and consumer ratings, but more limited features.” Outfitting the new streaming brand with both premium features and strong performance capabilities will require migrating on to a single tech stack, Perrette said.

The company plans to continue offering a range of streaming options that are both ad-supported and ad-free as part of its broader strategy. “In recent years, a strategy has emerged to suggest the video business will be better off collapsing all windows into streaming, overpaying for and over-investing in content and offering it all at the same time for a low price,” Perrette said on the call. “We don’t believe in this strategy. While we intend for streaming to be a critical part of our company, and a key driver of our growth as consumers continue to shift their viewing habits from linear to nonlinear, it’s only one part of our diversified approach.”

Instead, Perrette said, Warner Bros Discovery will prioritize consumer choice by offering a range of services in streaming at different price points. “Warner Brothers Discovery’s unmatched depth and breadth of content provides us the opportunity to offer something for everyone. Providing consumers with a range of entertainment options will maximize our reach and financial returns.”

The overarching goal? Growing engagement. “[This will] enable us to meaningfully reduce churn, support gross [subscription] adds and increase monetization, particularly with our ad-lite offering,” said Perrette.

The new streaming service will roll out in the US beginning next summer, with Latin America following later in the year. European markets and key Asia Pacific territories will have to wait until 2024 before they can access the new combined offering.

“There’s much work to be done over the coming months – from retooling the tech platform to enabling proper content and metadata ingest around the world, and ensuring a seamless customer migration for launch,” said Perrette. “There’s lots to do. And we’re determined to get it right, which will take a bit of time.”

Warner Bros Discovery posted its Q2 earnings today, which revealed less-than-sparkling numbers. The company’s pro-forma revenue dipped 1% from the same period last year and netted a loss of more than $3.41bn, much of which it attributed to high restructuring expenses in the wake of its recent merger.

Even so, the company’s chief executive officer David Zaslav expressed optimism as he looked to the future. “We’re confident we’re on the right path to meet our strategic goals and really excel, both creatively and financially, and couldn’t be more excited about the future of our company,” he said in a statement.

On today’s call, the executive outlined three key goals. “[Our] strategic priorities are to create the most compelling and diverse content offering in the world, maximize its reach, engagement and value through a broad distribution and monetization strategy and operate as one company with one mission – to be the premier media and entertainment leader globally.”

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Digital Transformation Mergers and Acquisitions Future of TV

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