HBO Max Survives Un-Kneecapped ... for Now

Warner Bros. Discovery
(Image credit: Getty Images)

The first full quarterly earnings report by the newly merged Warner Bros. Discovery didn't include the wholesale kneecapping of HBO Max many in the media-tech business feared was coming. 

WBD CEO David Zaslav said there will be a combined brand that replaces the company's two big direct-to-consumer subscription streaming services, HBO Max and Discovery Plus, and it will launch starting in the U.S. next summer. 

Also read: Warner Bros. Discovery Has Big Q2 Loss, Blames WarnerMedia

It will include subscription-only, partially ad-supported and fully ad-supported iterations. A "combined tech stack," pricing and everything else -- including the name of the service and how it will be priced -- are still being worked out in a gestation process that's still in its "early innings."

So no, Thursday was not the day that the "Shark Week" guys dismantled the cathedral of The Sopranos, The Wire and Game of Thrones. But that's not to say the outcome will ultimately make HBO fans happy.

Zaslav said many of these key details will be revealed during WBD's "investor day" later this year. 

Also read: Panic Grips the Video Business! -- Are the 'Shark Week' Guys Really About to Blow Up HBO Max?

Attempting to deflect rampant speculation among video industry followers over the last few days that that WBD was in the process of casting off most of its HBO scripted entertainment production wherewithal and leaving only a small development team under just-extended top creative Casey Bloys, Zaslav called HBO a "crown jewel" among WBD assets and a "center spoke" within its combined DTC brand. 

Also read: CNN Originals Get Their Own Hub on Discovery Plus

WBD's top managers, who mostly come from the Discovery side of the $43 billion merger of AT&T's spun-off WarnerMedia division and Discovery, tried to make a case that HBO's "male-skewing" batch of "appointment" viewers complements Discovery's merry band of female-centric, "comfort"-seeking watchers. (Note to WBD investor relations: Do the chicks dig it when you call them lightweights?)

WBD's leadership team talked about eagerly awaiting HBO's Game of Thrones prequel, House of the Dragon, mentioning it in the same sentence with partial-attention-span offerings including 90 Day Fiancé ... as if it were a cooking show on Discovery Plus, exploring how strange food combinations unlock unexpected flavors. 

See this slide from Thursday's earnings presentation:

"Unique & Complimentary" slide from Warner Bros. Discovery's Q2 2022 earnings call.

(Image credit: Warner Bros. Discovery)

HBO Max and Discovery Plus added only 1.7 million subscribers in Q2 to finish the quarter with a combined 92.1 million. With most of its international expansion coming in 2024, WBD expects its combined platform to have 130 million users by the end of 2025. The company will no longer segregate HBO Max and Discovery Plus subscriber metrics. 

Notably, WBD said it re-upped its agreement with AT&T to offer HBO Max promotionally with its wireless services. This should help that quest. 

So what's the service going to be called?

When asked by an equity analyst if the combined platform will retain the HBO moniker, Zaslav stopped well short of committing -- "We'll let you know when we make a determination," Zaslav said.

'Course Correction' ... or Just Contempt?

Blaming a $3.418 billion loss in Q2 and reduced guidance on the strategies of the previous administration, Zaslav and his team made one determination perfectly clear Thursday -- despite a fraught, sometimes contentious but ultimately successful launch of HBO Max in the middle of a global pandemic and quarantine, they have nothing but disdain for the executive who bravely oversaw that challenging endeavor, former WarnerMedia CEO Jason Kilar.

On no less than four occasions, Zaslav and team referenced the 192 Emmy nominations last month generated by WBD shows and talent, not mentioning once that 140 of those were gestated by HBO.

Over and over again, Zaslav and his No. 2, Discovery streaming chief JB Perrette, made the point that they are "course-correcting" what they feel was an over-emphasis by Kilar's executive team on streaming. 

"We fully embrace theatrical," Zaslav said, highlighting in a not-so-subtle way his team's departure from Kilar's highly controversial strategy to release the entire 2021 Warner film slate day-and-date on HBO Max streaming at a time when many theaters were shut down due to COVID. 

"Our streaming strategy reflects importance on, rather than the dependence on [subscription streaming]," Zaslav added, just before turning the SVOD topic over to Perrette ... who directed a flurry of his own zingers Kilar's way. 

WBD, Perrette said, "doesn't believe" in "overpaying for and over-investing in content, and offering it all at the same time at the same price." 

Streaming, he added, is "only part of our diversified strategy," while noting, "We don't chase consumers at any cost." 

Say what Zaslav and Perrette will about the business leader they displaced, but his stock wasn't down Thursday nearly 10% in after-hours trading ... and nearly 30% since the merger in April. 

WBD managers noted on several occasions Thursday how they've paid down $6 billion of merger debt since April, but WBD is facing growth pains that are becoming pretty familiar in the TMT biz these days. 

Indeed, WBD subscriber growth wasn't great, and that could be a reason for Wall Street's reaction -- WBD's DTC services were actually down 300,000 customers domestically for reasons the company partly attributed to accounting changes. 

Yes, in terms of the global macro economy, winter has arrived for Zaslav and team --  the CEO even alluded to more "adjustments" coming in the weeks ahead. 

Yes, the technology-media-telecom thing of ours provides for one challenging course, and who knows where Zaslav will be hitting balls in two years ... and what his predecessors will be saying about his strategy. ■

Daniel Frankel

Daniel Frankel is the managing editor of Next TV, an internet publishing vertical focused on the business of video streaming. A Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, Daniel has worked on staff for publications including E! Online, Electronic Media, Mediaweek, Variety, paidContent and GigaOm. You can start living a healthier life with greater wealth and prosperity by following Daniel on Twitter today!