Last year, AT&T announced plans to spin-off WarnerMedia to Discovery. Now that the deal is finally complete, the two companies have officially merged to form a new one called Warner Bros. Discovery (DISCA).
The new company’s CEO David Zaslav used his first earnings call with investors on April 26 to lay out his vision for Warner Bros. Discovery, explaining why the audiences for HBO and Discovery aren’t as different as people might think.
He took time to gently poke at Netflix, while declining to explain why he decided to cancel CNN+ just weeks after it launched.
Zaslav Wants All The Assets In One Place
Two years ago, AT&T combined all of its disparate assets into one hub. So material from across the WarnerMedia library, including shows they developed for other networks, would all be available in one place.
That meant you could watch acclaimed HBO originals like “The Wire,” CNN docuseries like “Anthony Bourdain: Parts Unknown,” and shows from TBS, The Cartoon Network and classic films from the TCM back catalog all in one streaming service, a revamp of HBO Go that would be retitled HBO Max.
While it was sometimes a bit whiplash inducing to see “Friends” offered next to “The Sopranos” next to a cooking show starring Selena Gomez (there was a time when HBO was as famous for the kind of programming it didn’t make as much as the stuff it did, hence the “It’s Not TV” ad slogan it once had), the approach worked well enough to make HBO Max the third-biggest streaming service.
Last year, CNN announced plans to launch its own streaming service CNN+, and intended to remove popular content such as Bourdain’s programs and “Stanley Tucci: Searching for Italy” from HBO Max so they could be CNN+ exclusives.
It was never entirely clear that there was much of a demand for a CNN spin-off, and Zaslav reportedly thought it was a bad idea before he took over. It was closed last week, less than a full month after launching and with just 150,000 paying subscribers.
Zaslav declined to expand upon the decision on the call, instead saying that CNN was “the best journalistic organization in the world" and "we're fully committed to it."
But at a Warner Bros. Discovery companywide town hall earlier this month, he essentially noted that he didn’t want to dilute HBO Max’s impact by offering secondary products.
“We don’t want to go to eight places. We want to go to one place, and we want to see everything we want to see,” he reportedly said. “When we put it all together, we were much more successful.”
HBO
HBO Max Is Coming For Netflix…But Won’t Overspend to Get There
Instead of a CNN+ approach of separate streaming services for all of the companies different channels, Zaslav says Warner Bros. Discovery plans to incorporate material from Discovery’s umbrella of channels onto HBO Max, including content from the Food Network, HGTV, Animal Planet, TLC and Travel Channel into one super-charged streaming service.
“You need a diversity of content for everybody in the home,” said Zaslav. “Our research shows that people who watch (HBO’s) ‘Euphoria’ their second favorite show is (TLC’s) ‘90 Day Fiancé.’”
But he noted, it will take time to incorporate everything, and didn’t provide a specific time table.
(If there are any plans to rename HBO Max to reflect the addition of the Discovery material, as has been speculated, Zaslav didn’t mention it on the call.)
He added that the company will adopt the current ad-friendly model that more and more streaming services are moving to, with both lower-price advertising-free and "ad light” to attract more customers. He also noted that in addition to closing CNN+, he’s looking at other ways to save money and cut costs, by finding $3 billion in cost savings.
While HBO Max is a natural competitor to Netflix (NFLX), and an infusion of new content should help the company grow, Zaslav cautioned that’s he not going to go over the deep-end to compete with Netflix, which is now facing the repercussions of its throw money against the wall and see what sticks approach.
“We will not overspend to drive subscriber growth" he said on the call, and "we are not trying to win the direct to consumer spending war."
One advantage that Warner Bros. Discovery has over Netflix is that it doesn’t have to win the streaming war, as it continues to make money with theatrical releases, video games and cable channel subscription fees. It’s a distinction Zaslav pointed out in a move that many analysts see as a nudge against the company.
"We have the ability to ring any number of cash registers," he said. “"I think it's a big benefit that we're a fully diversified company.”
