Warner Bros. Discovery says it will combine HBO Max and Discovery+ into one platform that is commercially and technologically viable. But it looks like the conglomerate will be playing catch-up in non-US streaming markets for many years to come.
It’s a terrible mistake for a group that includes iconic pay-TV brand HBO and has already begun rolling out its own direct-to-consumer service HBO Max.
The situation is particularly dire in the wider Asian region, which is currently the world’s fastest growing streaming market, but where the new enhanced WBD iteration of HBO Max won’t be available for another two years.
Courtesy of Warner Bros. Discovery
“We are planning to launch [HBO Max] the service rolls out in the US next summer. Latin America will follow later in the year, European markets [currently] with HBO Max to follow in early 2024, with additional launches in key Asia Pacific territories and some new European markets coming later in 2024,” said JB Perrette, CEO and President of Global streaming and gaming for Warner Bros. Discovery, on a conference call Thursday, following the release of the combined WBD’s second-quarter financial results.
Admitting that the software HBO Max is built on is not up to par is sad. HBO Max has had “performance and customer issues” but offers a rich set of features, Perrett explained on the conference call. On the other hand, Discovery+ has more limited features but provides a more robust underlying delivery infrastructure.
Too bad for users in the eight markets in Asia where the HBO Go platform is currently available. They were told that HBO Max would represent a technical upgrade to what was currently being sold.
While the group’s technological problems will surely be overcome, the lost time and exit from 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 nearing saturation, while an impending recession will cause more consumers to reduce their discretionary spending and possibly reduce the number of video subscriptions per household.
The rot has already begun in the UK, where BARB research published this week found a 2% quarter-on-quarter decline in the number of British households with any SVOD service.
Perrett says the new WBD/HBO Max is designed to be so good that it reduces churn. But until WBD Max is rolled out in some parts, Apple TV+ and Amazon’s Prime Video will have time to fill geographic gaps in their current service matrix, expand their content production studios and acquire subscriptions through blockbuster content like “Lord of the Rings: The Rings of Power’ or ‘Ted Lasso’ and ‘Parting’.
In fact, WBD’s goals for the new service are curiously insufficient. It aims for 130 million global subscribers by 2025, up from the 92 million the conglomerate currently has. But that compares to 2022 figures of 220 million for Netflix; Disney+ with 138 million (excluding Hulu and ESPN+); and the 65 million that Paramount+ quickly built.
Armed with Discovery+ technology, a fresh look at the balance between AVOD and SVOD, plus a wealth of content (Discovery, HBO, Warner Bros. and a mega-pack of TV brands covering news, kids and entertainment), there’s every reason to think that WBD / HBO Max is coming to the market. One of the advantages of being late to the party may be a shorter rise in profitability compared to its early competitors.
“The 2024 launch of new paid and free streaming platforms likely allows the company to drive immediate monetization through large licensing deals and some pockets of growth in theatrical and branded pay channels,” said Vivek Couto of consultancy Media Partners Asia. “It also gives management new time to plan execution and strategy for technology, content and localization as well as pricing and understand what their right to play is in the region.” The focus will invariably be on trying to achieve 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 has well and truly burst,” says Enders. “The decline in Netflix’s stock price is a harbinger of all these phenomena — people on Wall Street no longer believe in it.” Enders adds that there is no more room in the upper 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. “HBO is the one that has the brand recognition, not HBO Max,” Enders says. She sees HBO Max’s best prospects in North and Latin America. Europe is different and is a more established pay TV market thanks to 50% of the audience being over 42 years old.
“They will keep open the possibility of launching in these other European markets.” When they see that they’ve built a big pay-TV audience for House of Dragons, for example, and the other spinoffs, they’ll see that it’s perpetuated the value,” Enders says.
However, a second cause for concern is that in the interim period before the new service is launched, WBD will actually be helping its competitors by offloading content.
This is already underway.
Variety understands that major 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, their output is split between Prime Video and Disney+ Hotstar.
All eight Harry Potter films will leave HBO Max starting August 31 and can now be found in the US on Peacock. HBO Max has quietly removed six Warner Bros. streaming exclusives. and canceled the Batgirl movie in an effort to cut costs.
In Europe, HBO Max also risks alienating content providers. In July, the agency abruptly canceled several commissioned originals, 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 plans to expand, HBO Max’s stated local-first strategy now rings very hollow.
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