‘House Of The Dragon’ Does Its Job, But WBD Still Faces Big Challenge

If ever a Hollywood company needed a hit right away, it’s Warner Bros. DiscoveryWBD
, and it’s right here, right now. Thankfully, House of the Dragon seems to be doing the job it was created for, to provide a Sunday night anchor for cable premium service HBO and a long-term subscription driver for troubled streaming service HBO Max.

Metrics company Samba TV reported that 2.6 million households watched The Game of Thrones spinoff in its first six hours on Sunday on HBO or HBO Max, according to trade publication Next TV. For comparison, that’s more than double the June debut of Netflix’s fourth season of its durable Stranger Things franchise, which had previously claimed the year’s biggest initial audience.

For its part, Warner Bros. Discovery said Monday afternoon that nearly 10 million viewers watched the show, a record for HBO/HBO Max.

Perhaps WBD is getting its money’s worth, though investors hardly noticed, leaving shares at $12.71 a day after the debut, less than half the year’s high of $26 a share last spring.

The Dragon debut wasn’t without hiccups. Some customers reported system crashes and other problems getting the show to run in the first couple of hours. That’s annoying (though the least of HBO Max’s ongoing technical and interface problems), and bad timing. But system crashes are hardly new for live debuts of high-profile programming, even in this era. They’ve been with us at least since the Victoria’s Secret Fashion Show went online, back when hamsters powered the Internet.

More importantly, Variety reported WBD spent “under $20 million per episode” for the first season’s 10 episodes, which is about $5 million more per episode than Game of Thrones in its final, bloated season, and combined are the cost of one quite-substantial movie. But if audiences follow dollars, the company could be in for a good run.

In fact, WBD is counting on that. The show’s debut was bracketed with ad campaigns on social media and online giving a 40-percent discount for new HBO Max subscribers who sign up for a year.

That kind of long-term commitment is vital these days in Streaming Land, where more and more customers are happy to sign up for the run of a high-profile show, only to cancel and move on to another service as soon as it’s done.

Such “churn” is the bane of the major subscription services, which all are facing higher costs to attract and retain customers amid stiff competition and a weakening economy. At the same time, all the services are facing increased pressure from investors to actually, you know, make money.

And success with House of the Dragon might just help stabilize WBD after a very unstable several months. The company sure could use the help, especially HBO Max, in the throes of deep staffing cuts, program cancellations, and wide uncertainty about its future.

HBO Max has gotten a lot of love from critics, awards shows, and fans since launching a little over two years ago, especially for zeitgeist-defining series it shares with HBO, such as Mare of Easttown, Euphoria and Insecure.

Viewership and profits haven’t necessarily kept pace with the awards and reviews, however. A new Nielsen measurement tool, The Gauge, said HBO Max comprised 1 percent of all viewership on streaming, cable, and broadcast television in July.

Industry leader NetflixNFLX
grabbed 8 percent of viewing time, YouTube another 7.3 percent. All of streaming and all of cable TV each received slightly more than one-third of viewing, and broadcast 21.6 percent.

Given how relatively new HBO Max is compared to those in front of it (even Disney+ attracted only 1.8 percent, according to Nielsen), perhaps that viewership should be seen as an achievement, especially considering that other newcomers AppleAAPL
TV+, Paramount+, Peacock, and Discovery+ didn’t even register on The Gauge.

But HBO Max’s efforts to create its own identity have been hobbled from the start, thanks to a crummy launch strategy, pandemic production delays, and even a name that still confuses many consumers.

Previous Warner Media chief Jason Kilar was all in on HBO Max and streaming in general, controversially putting all of Warner’s 2021 movie slate on the service the same day they debuted in theaters. He also commissioned numerous original series and 10 straight-to-streaming movies a year for the service, to begin to carve out its own brand name and presence.

All of that is on hold, and more, since Warner Media merged with Discovery Media in April, and seemingly every executive who worked under Kilar has departed, with the exception of HBO/Max content chief Casey Bloys.

CEO David Zaslav faces a formidable task, managing more than $53 billion in debt for the nascent company, while creating enough content to feed the company’s basic and premium cable operations, theatrical exhibition pipeline and two major subscription streaming services.

Sometime next year, the company said during its most recent earnings call, it will merge HBO Max and Discovery+ into a single service (separately, they reach a combined 92 million subscribers). That may further justify the stout $14.99 a month ($9.99 if you don’t mind ads with your premium TV!) HBO Max subscription price, as will continued breakout hits such as House of the Dragon.

But getting there won’t be easy. Zaslav has committed to finding $3 billion in “synergies” from the merged company this year. That’s mostly translated to a lot of layoffs, including another 70 HBO Max employees last week.

It’s also manifesting in cancelled movies and TV shows, most controversially of the $90 million straight-to-streaming feature Batgirl, which featured a Latinx lead character. The film’s two directors, of Arab descent, found out their nearly completed movie was being cancelled while they were in Egypt for one of their weddings.

The justification for the cancellation: it would cost too much to upgrade visual effects and other parts of the movie for a big-screen release. Worse, as far as Hollywood was concerned, there was a fast-expiring tax write-off that Zaslav could take advantage of by cancelling the project. That decision has not been popular in Hollywood creative circles.

Separately, HBO Max also removed a string of straight-to-video movies it had commissioned from the likes of Doug Liman, Melissa McCarthy, Seth Rogen, Robert Zemeckis, and Anne Hathaway (twice!), along with several series. Again last week, the company dropped more than 200 older Sesame Street episodes.

In each case, the reason for dropping the shows was about saving money. Contract payouts made it more expensive to keep running shows with relatively low viewership than to mothball them. So much for the Long Tail theory of monetizing viewership.

So, House of the Dragon is carrying a lot on its scaly shoulders, including a significant slice of the near-term profitability of Warner Bros. Discovery. Zaslav better hope it keeps flying as high as it did in those first few hours after release.