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FutureStarrInsights From the CFO: Warner Bros. Discovery Sees Success With HBO Max lau
Since their rise to dominance on Wall Street, media companies have dazzled investors by boasting about streaming subscriber numbers. When Netflix hit an unprecedented subscriber cap in the US market, profitability became the focus of attention. Warner Bros. Discovery CEO David Zaslav will address plans to combine HBO Max and Discovery+ into one service at Wednesday's event and reveal its name and marketing plan. Revenues Warner Bros. Discovery executives have provided clarity regarding HBO Max, their streaming service owned by Warner Bros. Discovery. To combat speculation surrounding its fate, executives announced plans for an entirely new service which will launch in summer 2023; it will have its own brand and pricing; however it will no longer bear the HBO name. Warner Bros. Discovery hopes to reach 130 million global subscribers and generate $1 billion in revenue by 2025. Warner Bros. Discovery reported direct-to-consumer revenues that grew 6% year-on-year to an impressive $2.3 billion, driven by subscriptions to HBO Max and ad revenues from their ad-supported tier. Overall revenues, however, decreased 4% year-on-year due to decreased DTC content licensing fees as well as lower wholesale revenues from Amazon Channels; internationally the company saw decreased earnings. First-quarter losses at Netflix could be partly attributed to industry dynamics; however, they also included charges related to its merger with Discovery in 2022. Netflix said they took on too much debt to finance this deal, leading them to pay more interest than anticipated as a result; their current debt stands at over $53 billion. On its earnings call, the company's chief financial officer announced its goal was to attract top-tier storytellers and create superior content across platforms. Furthermore, it would invest in live programming to engage current subscribers and reduce churn. Finally, plans included increasing ad sales across its ad-supported tiers in order to offset production costs of original shows. WBD CEO David Zaslav recently reiterated his belief that WBD's streaming business will become profitable this year and that profitability would be achieved in 2024, along with reaching its long-term revenue goal of producing $1 billion by 2025. This marked an extraordinary turnaround for a company which took drastic measures this year to reduce debt following the merger, including cutting content spending budget and laying off hundreds of employees. Subscriptions As the streaming market expands, traditional media companies are competing with Netflix and Disney+ to attract subscribers with their own line of direct-to-consumer offerings. WBD's HBO, Discovery+ and Discovery Kids subscription services have struggled to gain new customers; therefore its leadership hopes to address that by offering Max. WBD will combine content from Discovery+ and HBO onto one platform, offering both ad-free and ad-supported plans. Set to debut later this spring in America and later across Europe, WBD hopes that their wide array of programming and more attractive pricing strategy will draw customers away from rival services. WBD CEO David Zaslav announced at an event held to unveil its newly rebranded service as Max. According to him, it will offer enhanced user experiences such as default kids profiles with parental controls and premium video playback that promises cinematic viewing experiences. Furthermore, WBD promises a new mobile app and revised user interface in 2017. WBD also announced its rebranding, along with adding original content such as DC movies and Matt Reeves series starring Colin Farrell as well as Chip and Joanna Gaines' series to Max in order to retain users and reduce "voluntary churn," or the number of subscribers leaving due to billing issues. WBD hopes these initiatives will increase retention among users while decreasing voluntary churn rates - an indicator of user disengagement due to billing problems. WBD will need to take drastic measures if it wants to attract more subscribers in an increasingly saturated streaming marketplace and slowing growth. WBD had 96.1 million total subscriber count as of the fourth quarter compared with Netflix's 231 million and Disney's suite of services with 235 million. Without exciting original content or big name actors on board, WBD may find itself struggling against these titans of streaming; hopefully their new name and branding can attract even more users to WBD's services. Ad revenue Streaming services such as HBO and Discovery+ give users access to a vast variety of content. HBO Max promises a one-stop shop for both scripted and unscripted programming - featuring features such as parental controls and default kids profiles - plus it will offer ad-free viewing in 4K quality for viewers who upgrade to its most expensive tier plan. WarnerMedia currently boasts 96.1 million subscriber base across HBO, HBO Max, and Discovery+ as of the fourth quarter of 2022. However, WBD recorded a US$2.1 billion loss during that same quarter, due to cost associated with restructuring and write-downs related to its merger with Discovery; furthermore advertising revenues decreased 14% year-on-year. WBD has taken measures to address its challenges by restructuring its senior management team and rebuilding the business with a fresh new strategy. Jon Steinlauf was appointed as its new CEO with an emphasis on inclusive entertainment - along with assembling an eight-member executive team from Discovery teams mostly dedicated to carrying out this plan. WBD has also come under scrutiny for its lack of diversity both within its leadership ranks and board membership, and in its studios. WBD has strived to recruit more diverse talent into its studios; yet its past creative gambits may never again emerge from a studio more focused on pleasing Wall Street than pleasing fans. The merger between HBO Max and Discovery+ marks another sign that streaming industry trends are shifting towards cable bundles of platforms. Investors have increasingly demanded higher profits from streaming companies and many have already started backing away from original programming production. Costs Successful streaming services require significant investment. Therefore, it's vitally important to understand the costs associated with HBO Max lau. This platform has been in development for some time and is on schedule to launch sometime around Spring 2022 - being HBO's inaugural attempt at offering standalone premium video services such as Netflix in the US market. One major worry for subscribers is the consolidation of HBO Max with Discovery+ in one app, potentially leading to higher prices than they can afford; however, current cost of HBO Max stands at only $16 monthly which should make up for any increase. Warner Bros. Discovery is in the midst of an expensive restructuring that will incur significant costs over time, including job cuts and cancellation of projects in order to meet cost goals. WBD believes this cost cutting will benefit them in the long run by reaching 100 million direct-to-consumer subscribers by 2025. The company seeks to draw in new subscribers by expanding its library with more diverse content from DC Comics and an animated series starring Wonder Woman, in addition to expanding existing titles from DC. Furthermore, their streaming platform will become more user-friendly by starting faster with 20%-30% faster response times; plus they will have rebuilt download capabilities that increase reliability. WBD's streaming strategy holds great promise despite its difficulties. The company has invested in an effective content strategy and attracted over 96.1 million direct-to-consumer subscribers; additionally, efforts were undertaken to increase monetization capabilities by making changes within a matter of days rather than weeks; this should enable WBD to grow subscriber bases and compete against rivals such as Netflix and Amazon Prime.