It’s Not TV, It’s…  

We’re probably only about two months (or less) away from Warner Bros. Discovery finally combining HBO Max and discovery+ into one hulking streaming service. WBD’s streaming chief JB Perrette has promised a seamless transition, which is why it has been taking a while to figure it out. But it’s not just a technology and UI integration issue. We also don’t know how the service will be branded. But even more important is how the unscripted and cheaply produced fare favored by the Discovery Inc. side of the house will mesh with the mostly scripted and more expensive WarnerMedia legacy. And with $3 billion in savings on the table per WBD CEO David Zaslav’s synergy promises to Wall Street, we all know that efficiency is going to win out over Hollywood largess. 

Next? Zaslav’s major challenge is to reign in costs without stunting HBO Max’s growth trajectory that has taken it from zero to 45.1 million subscribers in just over two years. But since then, the economy has faltered, and consumers have more choices than ever, especially with the explosion of FAST-live channels that weren’t a big factor when HBO Max launched but now seem ubiquitous. Consumer price sensitivity (thanks, inflation) is part of the reason that 30% of HBO Max’s customer base is AVOD even though the company’s ad-supported tier is only a year old. It launched that tier around the same time it ditched Amazon Prime Video Channels, but this week brought reports that WBD may be inching its way back, perhaps as a hedge against the economic headwinds that are probably already rearing their heads in HBO Max’s Q2 growth numbers. We won’t know for sure until WBD announces Q2 earnings in a few weeks (no earnings call date yet), but one major sticking point that pushed HBO Max to sever its Amazon ties was the lack of data sharing on customers, and that’s likely a big part of talks supposedly underway now. 

 The other reason WBD is open to more flexible distribution agreements and affiliate marketing arrangements, including its deal with Verizon’s +play initiative in April, is that WBD executives know that canceling expensive shows like J.J. Abrams’ recently scrapped “Demimonde” may at some point start to hurt the brand if taken to an extreme. People can see the money on the screen, and some competitors aren’t afraid to pay the costs of Hollywood’s bloated but effective production habits. If Zaslav pushes too hard on production cost cutting, people could defect to other outlets. But in fairness to WBD, plenty of fat deserves scrutiny – and to be sure, that $3 billion won’t all come out of content budgets (HBO Max just last week cut nearly 1,000 ad-sales jobs). But this is a new era for the HBO brand, which has always styled itself as “not TV.” We’ll see if that holds true in the coming months.

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