Warner Bros. Discovery to reassess content distribution strategy

Warner Bros. Discovery (WBD) will reevaluate its content distribution strategy as the giant company looks ahead to a “noisy” 2022, with the axing of CNN+ likely to be only the first of “swift and decisive” acts by management.

Zaslav, speaking on the company’s first earnings call since the $43bn merger, outlined how WBD would look to control costs and increase revenue, with content spending under the microscope and third-party programme sales back on the agenda.

‘Content monetisation’

US studios have vastly reduced the amount of international content sales over recent years as they rolled out their own global streaming services, but Zaslav suggested that sales of HBO and Discovery shows – WBD’s library runs to more than 200,000 hours and ranges from Succession and Scooby-Doo to Doom Patrol and MythBusters – could soon return.

Doom Patrol

“If we’re not going to be in a particular country for a period of years, we should be monetising our content,” Zaslav explained. He said his team had “taken a look” at HBO Max and could see “that there is a huge amount of content… that’s not being used at all on the subscription platform.

“What content is being used and valued on the subscription platform, how do you enhance that and drive that together with our existing content to reduce churn and drive growth, and what is not being used on that subscription platform and how do you monetise that in a way that’s meaningful?”

“Everything should be monetised. We own more content, more compelling IP than any other media company in the world. We have a strategic focus on a global platform that reaches people either through subscription-only or ad-light, but ultimately, whether it’s through our existing platforms or through AVOD, we should be monetising all the great content that we have.”

Growth… but not at all costs

Zaslav said that the goal “is to maximise long-term shareholder value and asset value, not just subs”, reiterating recent comments from HBO Max International chief Johannes Larcher.

Streamers’ huge content spending has come into sharp focus over recent months, with some analysts questioning whether the OTT model is viable in its current shape.

90 Day Fiance

Subscriber losses at Netflix – which in turn prompted the SVOD’s worth to drop by more than a third overnight – have also dented confidence in the sector, prompting a reevaluation of content spend.

Zaslav attempted to differentiate Warner Bros. Discovery from Netflix by emphasising his company’s focused approach, adding that the firm is “not trying to win the direct-to-consumer spending war.”

CFO Gunnar Wiedenfels admitted that he had been focusing efforts on the combined content spending of Warner Bros. and Discovery, which stands at $23bn.

“The goal of this exercise is not to identify ways to reduce what we spend on content, but to harmonise processes and analytics, so as to be more consistent and efficient in how we allocate our content spend across the entire global portfolio to optimise returns.”

‘Swift and decisive action’

Warner Bros. Discovery has previously said it can squeeze $3bn in cost savings from the merger and Wiedenfels criticised WarnerMedia’s former execs, pointing out that despite earning $40bn in revenue there had been “virtually no free cash flow” over the past 18 months.

David Zaslav

He also pointed to “a number of investment initiatives” that WarnerMedia had supported as areas that could be cut, with CNN+ “just one example”.

“There are a lot of chunky investments that are lacking what I would view as a solid financial foundation and meeting the ROI (return on investment) hurdle that I would like to see for major investments.”

Zaslkav added: “The attack [on synergies] is strategic, operational, structural and financial. We will clearly take swift and decisive action on certain items as you saw last week with CNN+, while others will take time to formulate appropriate action plans.”

Innumerable questions regarding the business’s operations outside of the US remain, ranging from the future of All3Media to German streamer Joyn.

Warner Bros. Discovery has confirmed it will combine HBO Max and Discovery+, although a date has not been confirmed. HBO Max reported 76.8 million total subs in Q1, while Discovery+ claimed 24 million.