Warner Bros. Discovery says it will merge HBO Max and Discovery+ into a single platform that is commercially and technologically viable. But the conglomerate looks set to catch up in streaming markets outside the US for many years.
This is a terrible mistake for a group that contains the iconic pay-TV brand HBO and which had already started to launch its own direct-to-consumer service HBO Max.
The situation is particularly dire in the wider Asia region, which is currently the fastest-growing streaming market in the world, but where the new, improved WBD iteration of HBO Max won’t be available for another two years.
Courtesy of Warner Bros. Discovery
“We plan to launch the [HBO Max] the service will begin sequentially in the US next summer. Latin America will follow the European markets at the end of the year [currently] with HBO Max to follow in early ’24, with additional launches in key Asia Pacific territories and some new European markets later in 2024,” said JB Perrette, CEO and president of global streaming and gaming, Warner Bros. Discovery, in a conference call on Thursday, following the release of the merged WBD’s second quarter financial results.
The admission that the software HBO Max is built on isn’t up to par is unfortunate. HBO Max has had “performance and customer issues,” but offers a rich feature set, Perette explained at the conference. On the other hand, Discovery+ has more limited features, but provides a more robust underlying delivery infrastructure.
Count on consumers in eight Asian markets where the HBO Go platform is currently available. They had been told that HBO Max would represent a technical upgrade from what was currently being sold.
While the group’s technology issues will surely be overcome, the time lost and out of the market can only be costly. There are at least two reasons for this.
First, global SVOD growth is already slowing: some markets are already approaching saturation, while a looming recession will cause more consumers to reduce their discretionary spending and likely reduce the number of video subscribers per household .
The rot has already begun in the UK, where a BARB survey released this week found a 2% quarter-on-quarter decline in the number of British households with some SVOD service.
Perette says the new WBD/HBO Max is intended to be so good that it reduces churn. But by the time WBD Max expands in parts, Apple TV+ and Amazon’s Prime Video will have had time to fill geographic gaps in their current array of services, grow their content production studios, and acquire subscriptions through content of great success as “Lord of the”. Rings: The Rings of Power” or “Ted Lasso” and “Severance”.
In fact, WBD’s goals for the new service are curiously underwhelming. It aims to reach 130 million global subscribers by 2025, up from the conglomerate’s current 92 million. But that compares to Netflix’s 2022 figures of 220 million; Disney+ with 138 million (excluding Hulu and ESPN+); and the 65 million that Paramount+ has quickly built.
Armed with Discovery+ technology, a new take on the balance between AVOD and SVOD, plus a wealth of content (Discovery, HBO, Warner Bros. and a mega package of TV brands covering news, kids and entertainment ), there are many reasons to think that WBD / HBO Max will come out swinging. One advantage of being late to the party could be a shorter rise in profitability than its early rivals.
“A 2024 launch of new paid and free-to-air streaming platforms will likely allow the company to drive immediate monetization through large licensing deals and some pockets of growth through the theatrical and branded paid channels,” says Vivek Couto of consultancy Media Partners Asia. “It also gives new management time to plan execution and strategy in technology, content and localization, as well as pricing and figure out what their right to play in the region is. The focus will invariably be on trying to get scale and monetization in key markets such as Australia, Japan, India and parts of Greater Southeast Asia.”
Analyst Claire Enders, founder of Enders Analysis, is even more pessimistic. “The streamer bubble is well and truly bursting,” says Enders. “The fall in Netflix’s stock price has been the harbinger of all these phenomena: people on Wall Street no longer believe in it.” Enders adds that there is no more space on the top tier, which includes Netflix, Disney+ and Amazon Prime Video.
HBO will continue to do well as a brand thanks to its “Game of Thrones” spinoffs, but not HBO Max, Enders says. “It’s HBO that has the brand recognition, not HBO Max,” says Enders. She sees the best prospects for HBO Max in North America and Latin America. Europe is different and a more established pay TV market thanks to the fact that 50% of the audience is over 42 years old.
“They will have the possibility of launching in these other European markets. When they see that they’re getting a big pay-TV audience for ‘House of Dragons,’ for example, and the other spin-offs, they’ll see that that’s perpetuated the value,” says Enders.
However, a second reason for concern is that in the interim period before the launch of the new service, WBD will help its competitors by downloading content.
This is already underway.
Variety understands that the big licensing deals in the Asia Pacific region are being split between local platforms in Australia and Japan and with regional players Amazon and Netflix. In India, its output is being split between Prime Video and Disney+ Hotstar.
All eight “Harry Potter” films will be released on HBO Max starting Aug. 31 and can now be found in the US on Peacock. HBO Max quietly removed six exclusive Warner Bros. movies. and scrapped the “Batgirl” movie in an effort to cut costs.
In Europe, HBO Max also risks alienating content providers. In July, the service abruptly removed several originals by order, including “The Informant,” “Lust” and “Kamikaze.” At a time when Netflix and Amazon are ramping up local productions and fast-growing services like RTL+ have revealed expansion plans, HBO Max’s first stated local strategy now rings very hollow.