Warner Bros. Discovery’s new streaming strategy is to undo its old streaming strategy

Hello, and welcome to Protocol Entertainment, your guide to the business of the gaming and media industries. This Friday, we’re taking a closer look at Warner Bros. Discovery’s pivot to doing things the way they were done before. Plus: recommendations on what to read, watch and play this weekend.

Streaming wars, the let’s-try-this-again edition

We’ve officially reached the course-correction stage of the streaming wars. A few months back, Netflix co-CEO Reed Hastings openly admitted that he was wrong about not embracing advertising. And yesterday, the leadership of the newly merged Warner Bros. Discovery argued that it had to change, well, almost everything.

Merging HBO Max and Discovery+ will be the biggest such change. The two services will be combined into a single brand, which will become available to US consumers next summer. It will roll out in additional markets in 2024.

  • The new service will run on the technology and infrastructure built for Discovery+, but incorporate some of the features introduced as part of HBO Max.
  • There will be an ad-free tier as well as a cheaper, ad-supported tier.
  • No word yet on which brand the company will use for the new service, but executives promised additional updates during an investor event later this year.
  • Separately, the company also aims to launch a free, linear, ad-supported streaming service, but executives did not share many additional details on it.

Warner Bros. Discovery leadership delivered this update amid a challenging week for the company. News that it had canceled “Batgirl” after spending $90 million on the film shocked the industry, and yesterday’s revelation that the company was lowering its financial outlook due to “changing streaming dynamics” didn’t exactly appease investors.

Blame it on the former boss: Executives insisted that the company was well-positioned to execute on streaming, but they also used every possible opportunity to blame WarnerMedia’s former leadership for some of the challenges the company now faces. Warner Bros. Discovery president and CEO David Zaslav did not mention former WarnerMedia CEO Jason Kilar by name, but essentially said that Kilar got almost everything wrong.

  • One of Kilar’s most controversial moves was to release Warner’s entire 2021 film slate on HBO Max the same day movies were premiering in theaters.
  • That won’t happen again, Zaslav said. “We will fully embrace theatrical, as we believe it creates interest and demand, provides a great marketing tailwind and generates word-of-mouth buzz as films transition to streaming,” he told investors.
  • Under Kilar, HBO Max also produced and acquired a number of exclusive movies. Some of those recently disappeared from the service, and Zaslav said that the company won’t spend any more money on such projects.
  • “We cannot find an economic case for it,” Zaslav said about movies made for streaming. “We cannot find an economic value for it. And so, we are making a strategic shift.”
  • Kilar also ended a distribution deal with Amazon last year, which had resold HBO Max to its customers via its own subscription marketplace. The executives suggested yesterday that they will reverse that decision.

Streaming isn’t everything…or is it? Throughout the very long earnings call, Warner Bros. Discovery tried to both talk up its streaming efforts, but also insisted that streaming isn’t everything.

  • “In recent years, a strategy has emerged that suggests 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,” said Warner Bros. . Discovery streaming boss JB Perrette. “We don’t believe in this strategy.”
  • Executives instead talked up the company’s existing linear TV business, which includes CNN, HGTV and the Discovery Channel. “We’re big believers in the linear business,” Zaslav said. “We expect it’s going to be a very significant cash generator for us, and a very good business, for many, many years to come.”
  • It’s true: Warner Bros. Discovery still makes a lot of money with its linear networks, to the tune of $5.7 billion in Q2 alone. Direct-to-consumer revenue for the same quarter was just $2.2 billion, which includes both streaming fees and legacy HBO subscriptions.
  • However, cord cutting has been rapidly accelerating amid economic pressure, with both Comcast and Dish reporting subscriber declines above 9% for the most recent quarter.

This may lead to a point where Zaslav and his team have to course-correct again, and more fully embrace streaming over the company’s legacy businesses. He acknowledged as much yesterday, but argued that it was still wiser to bet on multiple horses.

“We effectively have four or five or six cash registers,” Zaslav said. “We have every platform in the ecosystem. And in a world where things are changing, and there’s a lot of uncertainty and a lot of disruption, that’s a lot better than having one cash register.”

— Janko Roettgers

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#TGIF: How to spend your weekend

The pay-to-play of popular podcasts — Bloomberg News: : The podcast industry has ballooned into a powerful pillar of the modern media industry, but a dark secret of the guest appearance circuit is the rampant pay-to-play. Some guests are forking over as much as $50,000 to appear on popular pods, according to a new report from Bloomberg, with hosts and guests rarely informing listeners of the deal. The story sheds light on what appears to be a widespread practice in podcast categories like wellness, cryptocurrency and business, undermining the integrity of shows that are effectively running advertising without disclosure.

“The Anarchists” — HBO Max: HBO’s new documentary series “The Anarchists” is a fascinating behind-the-scenes look at the stunning growth of a fringe subculture of anarchists who fled the US to Acapulco, Mexico, to try to build their utopian world: no state authority, taxes or drug laws. The director, Todd Schramke, is deep within the community, having befriended many of its high-profile personalities over six years of filming. The series, which airs its fifth episode on Sunday, offers a profoundly intimate look at the personal lives of a sprawling anarchist community, its flagship conference in Acapulco and how the whole affair devolves into crime and tragedy.

“Belle” — HBO Max: The latest movie from Japanese animator Mamoru Hosoda is a visual feast of film, featuring gorgeous color work and animation alongside stunning set pieces and character design. The film is a take on the fairy tale “Beauty and the Beast” with a modern twist that helps the movie convey relevant themes about the internet, social media and human connection in ways a more straightforward adaptation couldn’t.

The English voice cast, which includes lead actress and singer Kylie McNeill performing the film’s original songs, translated from Japanese, also makes the dub one of the best I’ve heard in years. “Belle” released this week on HBO Max, and it’s well worth the time of any Miyazaki fan or those who’ve been acquainted with recent fantasy hits like Makoto Shinkai’s “Your Name” and “Weathering With You.”

MultiVersus — PlayStation, Xbox & PC: The new fighting game from Warner Bros. has proven to be more than just a Smash Bros. clone. Developed by Player First Games, the free-to-play brawler, out now in beta, features a truly bizarre assortment of playable characters from across the Warner Bros. Discovery portfolio, including “Scooby Doo” favorites Shaggy and Velma; Finn and Jake from Cartoon Network’s “Adventure Time”; LeBron James (from his “Space Jam” role); and Arya Stark from “Game of Thrones.” It shouldn’t work as well as it does, but MultiVersus has miraculously become an overnight hit, rising on the Twitch charts and attracting the attention of the pro fighting game community.

— Nick Statt

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Thoughts, questions, tips? Send them to [email protected] Enjoy your day, see you Tuesday.

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