JB Perrette, President and CEO of Warner Bros. Discovery Global Streaming and Games, speaks onstage during a Warner Bros. Discovery Streaming Press Event on April 12, 2023 in Burbank, California.
Jeff Kravitz | Getty Images
Humble as he could also be, Warner Bros. Discovery CEO David Zaslav proved this week he’s definitely a reputation dropper.
Warner Bros. Discovery unveiled its recent streaming service Wednesday, featuring a mix of programming from HBO Max and Discovery+. It should launch May 23 within the U.S., later this yr in Latin America, and in the remaining of the world in 2024. And it will be named “Max” — sans “HBO.”
At surface level, Warner Bros. Discovery’s decision to eliminate the name HBO Max is a logical marketing alternative. Look deeper, and it starts to resemble a microcosm of an existential tension that lies at the guts of the corporate — and the media industry more broadly.
The corporate is attempting to compete with Netflix and Disney to be a winner in streaming, while at the identical time pushing a message of economic discipline that deprioritizes streaming subscriber additions. It’s an issue of quality versus quantity, and Warner Bros. Discovery is attempting to play each side.
“Max is where consumers can finally say, ‘Here’s a service that not only has something for everyone in my household, but something great for everyone in my household,” said JB Perrette, the corporate’s head of streaming, during a presentation introducing Max on Wednesday in Burbank, California.
HBO Max no more
Perrette explained Wednesday why Warner Bros. Discovery removed the HBO a part of the name from the brand new service. HBO is synonymous with adult entertainment, and Max will lean into offering programming for youths and families, he said.
“All of us love HBO,” said Perrette. “It is a brand that is been built over five a long time to be the edgy, ground-breaking trend-setter for entertainment for adults. But it surely’s not exactly where parents would most easily drop off their kids. Not surprisingly, the category hasn’t met its true potential on HBO Max.”
On this photo illustration, the Warner Bros. Discovery logo is displayed on a smartphone screen and within the background, the HBO Max and Discovery Plus logos.
Rafael Henrique | Lightrocket | Getty Images
Warner Bros. Discovery executives felt the name HBO actually limited the audience for the streaming service since it scared away potential audiences. In addition they felt the HBO brand could possibly be diluted by the flood of Discovery’s reality TV programming set to hitch the platform, comparable to “Dr. Pimple Popper,” “90 Day Fiance” and various HGTV shows that more readily function background TV than fare for office water-cooler conversation.
“HBO is just not TV. HBO is HBO. It needs to remain that way,” Perrette said on the event. “We won’t push it to the breaking point by forcing it to tackle the total breadth of this recent content proposition had we kept the name within the service brand. By doing so, we’ll higher elevate and showcase our unparalleled array of other content and types that will probably be key to broadening the appeal to this enhanced product.”
The corporate’s reasoning is rational. HBO appeals to a certain audience, but in addition doesn’t appeal to a certain audience. HBO fans won’t unsubscribe from the service in response to the name Max, but some individuals who were scared off by HBO may now enroll once the adult brand has been obscured by the deluge of distinctly un-HBO content coming to the service.
Evolution of streaming
When HBO Max initially launched, AT&T and WarnerMedia executives emphasized to subscribers that this recent app was, at the beginning, the house of HBO. Now, about 80 million subscribers later, that time is less vital. Those that want HBO already know where to seek out it, and HBO Max will simply morph into Max on most platforms.
Streaming is entering its “teenage” years, Perrette said, and Max as a reputation makes more sense to maintain adding subscribers globally in a lower-growth world.
This could be the tip of the story if Warner Bros. Discovery’s stated goal was to maximise (no pun intended) the variety of subscribers who enroll for Max.
That was every media company’s goal when Zaslav agreed to merge Discovery with WarnerMedia in 2021. But based on Zaslav, that is now not the priority.
“I’d quite have 100 million subscribers or 150 million subscribers and have or not it’s really profitable than try to stretch for some big number, and in the long run, lose money,” Zaslav told CNBC’s Julia Boorstin after the presentation Wednesday. “We take a take a look at what people watch on Max and we will see exactly what they like and exactly what they do not. And a number of the stuff they are not watching, we will put it on a free AVOD [advertising-supported video on demand] platform, and a number of the stuff that they are not watching, we will keep it nonexclusively on Max, but we could also sell it to others.”
“We’re relentlessly focused on creating great content and monetizing in every way possible,” he said.
The media hedge
With its recent streaming strategy — and Max at the middle — Warner Bros. Discovery is hedging its bets.
The corporate is keeping Discovery+ around for purchasers who’re completely satisfied to pay $5 or $7 for just Discovery’s programming. Perrette said the corporate doesn’t “want to depart any of its profitable subscribers behind.”
Zaslav also alluded to Warner Bros. Discovery’s free ad-supported service, which the corporate has said is coming later this yr.
Warner Bros. Discovery could have kept HBO Max around, too. For those customers who wanted each Discovery+ and HBO Max, it could have offered a bundle for a reduced price. That is been Disney’s strategy, which offers bundled ways to combine and match Hulu, ESPN+ and Disney+.
As a substitute, the corporate loaded up one service with every thing it has, which might also eventually include some news from CNN and sports comparable to NBA or NHL games. Zaslav said Wednesday he’d have more details on that “in the approaching months.” Do not forget, Zaslav killed off CNN+ as a standalone streaming option last yr just a couple of month into its existence.
Warner Bros. Discovery is constructing Max as a one-size-fits-all option in order that it has the dimensions to stay around in a post-cable world that is coming increasingly quickly.
But Zaslav can be telling investors he’s high quality with limiting Max’s growth. It’s more vital for him to make cash than to compete with Disney and Netflix to grow to be the world’s largest streamer.
It’s a fragile balance: Disney, Paramount Global, Comcast‘s NBCUniversal and even Netflix are all battling the identical forces. Investors turned on the narrative of pursuing streaming growth in any respect costs last yr, cutting the valuations of many media and entertainment corporations in half.
What’s happening now’s, at its core, a hedge. The media industry knows streaming is the longer term but growth has slowed. Zaslav has championed the worth of the standard pay-TV bundle while criticizing the previous WarnerMedia regime’s profligate spending on streaming. He’s trying to offer investors a recent reason to get enthusiastic about Warner Bros. Discovery. That message, Zaslav hopes, is free money flow generation.
David Zaslav, President and CEO of Warner Bros. Discovery talks to the media as he arrives on the Sun Valley Resort for the Allen & Company Sun Valley Conference on July 05, 2022 in Sun Valley, Idaho.
Kevin Dietsch | Getty Images
“Ultimately, I’m a free money flow guy,” Zaslav said Wednesday. “We would like great talent, but ultimately, if we’re not being profitable on subs, if we have no ARPU [average revenue per user], we’re not helping ourselves and we’re not helping shareholders.”
There are some indications he could possibly be on to something. Warner Bros. Discovery shares are up nearly 50% this yr after falling about 60% last yr.
But while you take a two-part name — HBO and Max — and keep just the Max, the implication is “big” over “quality.”
That was AT&T’s message. It hasn’t been Zaslav’s message until now.
WATCH: CNBC’s full interview with Warner Bros. Discovery CEO David Zaslav
Disclosure: CNBC’s parent company Comcast owns NBCUniversal and co-owns Hulu.