Warner Bros. Discovery Won’t Overspend On Content As Last Discovery Quarter Tops 24M Streaming Subscribers

In its last quarter before merging with WarnerMedia, Discovery Communications streaming services led by Discovery+ grew to 24 million subscribers, executives said. Looking forward, CEO David Zaslav said the combined Warner Bros. Media won’t be pulled into the ruinously expensive war for top-level content in the Streaming Wars.

Together with the nearly 77 million subscribers to HBO/HBO Max, which reported last week as part of former parent AT&T
T
, the combined WBD will have more than 100 million subscribers. Netflix has 222 million, the most of any streaming service.

Company executives have signaled plans to eventually combine Discovery+ and HBO Max into one super service. Together, the HBO/HBO Max and Discovery streaming services added about 5 million subscribers in the quarter, though there may be significant overlap in the two.

Merging the two services into one offering is expected to require some significant time and technology. The resulting mega service is also expected to feature some content from Warner unit CNN, whose just-launched CNN+ now will close at the end of this week as part of cost-cutting measures. At least some of the lifestyle and other shows from CNN+ are expected to surface on CNN.com and possibly on HBO Max.

To keep up with the many streaming competitors, however, Zaslav promised WBD “will not overspend to drive subscriber growth.” He went on to promise the company would “invest in scale smartly” and won’t try “to win the direct-to-consumer spending war.”

WBD’s CFO
CFO
Gunnar Wiedenfels told analysts Tuesday morning that he was looking at ways to more effectively apply the cash the Warner side has been spending, to drive higher cash flow.

“Right or wrong, management has made a decision to invest a lot of the incoming funds into a number of investment initiatives,” Wiedenfels said. “As I’m looking under the hood here, again CNN+ is just one example, and I don’t want to go through a list of specific examples, but there’s a lot of chunky investments that are lacking for what I would view as a solid analytical financial foundation and meeting the ROI hurdles that I would like to see for major investments.”

With just about all the major media companies now in streaming, along with tech titans Amazon
AMZN
and Apple
AAPL
, hot movie and series projects and talent are commanding sky-high prices.

But Zaslav has plenty of reasons to be careful with his company’s cash. It was born with $55 billion in debt, and like all of the media companies with streaming services, saw its market capitalization whacked after last week’s disastrous earnings report from market leader Netflix
NFLX
.

The red pencil Wiedenfels is applying to Warner’s books may be happening all over Hollywood in coming months, as media companies re-evaluate spending priorities and project allocations amid a suddenly much more challenging market.

Netflix share prices have swooned a brutal 45.5% in the past month, dropping below $100 billion in market capitalization. The decline accelerated when the company reported its first drop in subscribers in a decade, with an even bigger drop projected for this quarter.

Collateral damage from that collapse hit most other big media companies as well, accelerated by a broader market drawdown. WBD shares are down 13% over the past week, including the 5.5% drop today.

Source: https://www.forbes.com/sites/dbloom/2022/04/26/warner-bros-discovery-wont-overspend-on-content-as-last-discovery-quarter-tops-24m-streaming-subscribers/