Netflix used to say its goal was to become HBO faster than HBO could become Netflix.
Well, Netflix succeeded on that front. Now Warner Bros. Discovery — in partnership with Disney and others — is looking to recomposite a cable TV-style streaming bundle to gain greater scale before Netflix gets even farther ahead of legacy media companies.
David Zaslav, Warner Bros. Discovery’s CEO, speaking on the company’s Q1 earnings call Thursday, described streaming as “a generational disruption” to the industry. WBD’s just-announced deal with Disney to introduce a three-way bundle comprising Max, Disney+ and Hulu starting this summer in the U.S. is emblematic of a “restructuring of how people view content,” he said.
“It does feel like this is a moment, a moment in terms of what the next year two years will bring,” Zaslav said. “You know I said a while back that this is a generational disruption. I went through a generation of disruption — not quite as big as this — but, you know, when my career started, when the cable business was a real disruption. And as we look at what happens ahead, there likely will be a, you know, a restructuring of how people view content.”
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Pricing of the Max-Hulu-Disney+ bundle hasn’t been announced. But it will be “priced very attractively for consumers,” Warner Bros. Discovery’s JB Perrette, CEO and president of global streaming and games, told analysts. As sold separately, the Disney+ and Hulu bundle (without ads) costs $19.99/month and the standard ad-free Max plan currently costs $15.99/month. So the bundle would be expected to be priced at some discount to the $36/month it costs to get them separately.
Perrette said both Disney and WBD will be marketing the cross-company bundle within their respective “buy flows,” presented to consumers when they are signing up for any of the streaming packages. “You won’t be able to miss” the bundle offer, he said.
Perrette said the “synthetic” bundle of Disney+, Hulu and Max for a single discounted price will let both companies increase the long-term value of subscribers they acquire and — ideally — reduce the rates at which they cancel service.
And, Perrette said, the bundling of cross-company streamers will allow for more efficiency in terms of content spending.
“I think what happened in the 2010s is the industry went down in a very dangerous financial path of trying to invest in every type of content in every genre to try and be something for everyone,” Perrette said. “And at the end of the day, we know where that led led us to. We’re now getting back to all being great at what we do and swim in the lanes that we were great at.”
Perrette continued, “Disney obviously is incomparable and world-leader in kids and family. We are world leaders in premium drama, scripted drama, comedy nonfiction verticals, and we can get back to investing in prioritizing our visions and our key content they can do theirs. And synthetically, these bundles allow us to do that while still providing the consumer with a very attractive price for the combination of products such that they feel like they don’t need to anymore do all the switching in and out of services month to month but rather pay and get an advantage of one price.”
With a bundle like Max-Hulu-Disney+, “even if they don’t use a service in one month, [consumers] still feel like they’re getting great value and they might use it the next month,” Perrette said. “And so it’s got a lot of rationale by pulling these together and makes us all be able to go back to investing in the areas that we really are great at.”
On the call, Zaslav said “there’s a lot of irrationality in the market that’s getting shaken out in terms of the amount of money spent” on streaming content.
“We said early on, it’s not how much — it’s how good, and that’s what we’re focusing on,” the CEO said. “And ultimately I think the business will look very different in two to three years.”
Warner Bros. Discovery announced first-quarter 2024 earnings Thursday, which missed Wall Street forecasts on revenue declines in its studio and TV segments. Revenue in the streaming business was flat at $2.46 billion, while direct-to-consumer earnings before interest, taxes, depreciation and amortization came in at $86 million (up from EBITDA of $50 million in Q1 2023).
