Warner Bros Discovery has announced that it is going to merge two of its streaming entities, HBO Max and Discovery+, to offer a new service. Jean-Briac Perrette, Chief Executive Officer and President, Global Streaming and Games announced the development in an earnings call.
The combined new streaming entity will be launched by the summer of 2023 in the United States. The company said that although the new platform would be SVOD-based, it will operate on AVOD models in some countries.
"Currently, we’re focused on launching our combined SVOD product with both an ad-light and an ad-free version in many markets. We’ve also begun to explore options of how best to reach consumers in the free ad-supported streaming space. We currently license our library to others, but we’ll assess how best to play in this growing business as the model evolves from free-to-air linear to free-to-view streaming," said Perette.
Speaking about the reasons behind combining the two, he said that HBO Max has performance and customer issues but offers a rich set of features, on the other hand, Discovery+ has more limited features but provides a more robust underlying delivery infrastructure.
"Bringing HBO Max and Discovery+ together is aimed at cutting churn so there’s something for everyone in the household,” he said.
"At the end of the day, putting all the content together was the only way we saw to make this a viable business," he added.
After the entity is launched in the summer of 2023, WB is aiming to launch it in Latin America by the fall of 2023. The service will further be launched in 2024 in the European, Asia-pacific and other markets.
"Of course, as we get more of the development work and testing under our belt, we will explore ways to accelerate the rollout, if and where it makes sense," added Perette.
HBO Max and Discovery+ have a combined base of 92 million subscribers which is an increase of 1.7 million over the first quarter. According to Perette, they are targeting the US business to be profitable by 2024 and for the global streaming segment to generate $1 billion in EBITDA by 2025.
"Embedded within this target result for 2025 is an EBITDA drag from less mature markets and new market launches. We believe that we can achieve these milestones with a total subscriber base of around 130 million global subs," he stated.
This merger has been long expected ever since the merger between WarnerMedia and Discovery. WarnerMedia was formerly owned by AT&T, but the conglomerate announced in 2021 that it would spin off WarnerMedia and merge it with Discovery.
The merger became official in 2022 and the company came to be known as Warner Bros. Discovery. After this, the CEO and President of Warner Bros. Discovery had said, "Our main priority is launching an integrated (streaming) service."