The combination of Warner Bros Discovery lost 300,000 online video subscribers in the United States in the second quarter of 2022. Globally, numbers were down by 10 million, after adjustments to the definition of subscriber, although outside the United States there were net additions of 2 million. There are plans to merge the HBO and Discovery+ online offerings, but the new name has not been announced.
Warner Bros Discovery reported that it had 92.1 million direct to consumer subscribers at the end of the first half of 2022, following the combination of the Warner Bros Discovery business with WarnerMedia in April.
That brought Discovery+, HBO, and HBO Max into the same group. Between them, they reported over 100 million subscribers at the end of the first quarter. The new company has adjusted that figure down by a round 10 million with a revised definition of subscribers, excluding those from AT&T Mobility that did not actually activate the service, and some other services like the Eurosport Player. That brought the number down to a rebased figure of 90.4 million total subscribers.
There was a combined loss of 0.3 million subscribers in the United States in the second quarter, offset by a gain of 2.0 million elsewhere through retail and wholesale relationships.
The company is planning to bring the HBO and Discovery+ online subscription services under a single brand and technology platform. It is also considering an advertising supported tier.
David Zaslev, the chief executive of Warner Bros Discovery, told analysts “Our objective was not only to be one of the top global streaming companies, but also a media company able to drive financial returns by distributing our content on every platform, and our conviction has not changed.”
“Our streaming strategy has evolved over the past year and really reflects the importance of, rather than the dependence on, this segment of our global content monetization plans,” he said.
Jean-Briac Perrette, the chief executive of global streaming and games, added: “in recent years, a strategy has emerged that suggests the video business will be better off collapsing all windows into streaming, overpaying for and overinvesting in content and offering it all at the same time for a low price. We don’t believe in this strategy.”
“While we intend for streaming to be a critical part of our company and a key driver of our growth as consumers continue to shift their viewing habits from linear to nonlinear, it’s only one part of our diversified approach.”
The plan is to bring together the HBO and Discovery+ offerings, using features from the former and the core infrastructure of the latter.
The primary focus for the rollout will be in the markets where HBO Max has already launched, starting in the United States in the summer of 2023, followed by Latin America, and then some European markets, although not in the United Kingdom, Germany, or Italy, where it has deals with Sky.
The direct-to-consumer segment of the business reported quarterly revenues of $2.23 billion and operating expenses of $2.74 billion. That produced a combined pro forma loss of $560 million, compared to a $235 million the same quarter the previous year.
Overall, the company reported total quarterly revenues of $9.83 billion and a net quarterly loss of $3.42 billion.
Notably, the traditional television business is still making money from the various networks it operates, including the Discovery Channel and CNN. According to Nielsen numbers, it has the most watched network portfolio. The networks segment reported total quarterly revenues of $5.74 billion and earnings of $2.26 billion.
The new Warner Bros Discovery business is evidently prepared to make major changes as it redefines its business. It closed CNN+ a month after its launch and cancelled its Batgirl movie before it was completed.
While online is strategically important, the business still sees value in theatrical releases and indeed in traditional television distribution. David Zaslav says that people are still tuning in for news and sport. He recalls people saying broadcast was dead in the nineties. “But in the end, that reach and the ability to drive advertising product is what kept it alive,”
“We’re big believers,” he said. “We expect it’s going to be a very significant cash generator for us and a very good business for us for many, many years to come.”