The rumors are accurate: Discovery+ will continue to operate independently before the impending merger of the smaller streamer and HBO Max.
David Zaslav, CEO of Warner Bros. Discovery, said during the company’s fourth-quarter earnings conference on Thursday evening that “the churn is very low, and it’s profitable” for those who currently subscribe to the service.
While Zaslav admitted that many customers would want to upgrade to the more comprehensive offering, which would include content from both streamers, some subscribers are content to pay $5 to $7 per month and continue with programming similar to that on Discovery and OWN.
“No sub is left behind is our plan. We have profitable customers who are delighted with Discovery+’s product line. Why would we turn off that? Zaslav threw in.
Despite the fact that Warner Bros. Discovery’s streaming arm lost $217 million in the fourth quarter, Discovery+ may be lucrative. Only about 5% of the $2.45 billion in revenue from the direct-to-consumer sector was attributable to advertising.
A “very challenging” macroeconomic climate, which Zaslav blamed for the company’s overall $2.1 billion loss, will, in his opinion, get better in the second half of the year.
The DTC segment increased its subscriber base by 1.1 million, increasing its annual total to 96.1 million from the 94.9 million subscribers reported in the prior quarter.
There is still no word on when the upcoming combined service will go live, but the business did announce a press conference for April 12 that, according to Zaslav, will show a “significantly enhanced” product platform.
One ring to rule them all
Zaslav is still certain that WBD is headed in the correct direction despite the ongoing revenue losses.
He disclosed during the conference that the company’s movie studio has placed orders for “multiple” new Lord of the Rings films.
The business has partnered with newly appointed studio heads Mike De Luca and Pam Abdy, who recently left MGM, to produce the movies. DC Studios is also starting a “new era” with the creation of five movies and five television shows.
Zaslav cited the popularity of HBO originals, such as House of the Dragon, The White Lotus, Euphoria, and most recently, The Last of Us, as subscription drivers as part of WBD’s content strategy.
When The Last of Us debuted in the first three months of this year, Zaslav was eager to highlight its exponential growth and seize the chance to expand on the weekly release model.
“We think that the best way to drive interest and engagement when you have content that is so good that it hits the zeitgeist is not to release the entire season on a platform all at once but to allow the buzz and anticipation to build over time,” Zaslav said. The same rule applies to theater: Content’s perceived worth rises when there is high anticipation and excitement.
A struggling strategy
Zaslav freely admits that the timing of the Warner Bros. Discovery merger’s closure prior to last year’s presentation may not have been ideal.
He said, “We had to take two distinct sales teams and pull them together. The group decided to drive price instead of additional volume.
“We accepted less volume than we could have in order to accomplish that. In contrast to others who acquired a much larger position, we are currently seeing a very soft scatter market, so that is having some effect on us, Zaslav said.
The business is aiming for a more equal balance for the 2023 upfront.
In my opinion, our content’s depth and the direction we take with prices put us in a great situation, Zaslav said. We’ll maintain this balance between volume and price in mind, but I always err on the side of price because I believe that’s where you really create asset value.
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