JB Perrette: WBD would be ‘crazy’ not to launch Max in UK

Warner Bros. Discovery would be “crazy” not to launch a direct-to-consumer streaming product in markets such as the UK, and international growth in general will be key to the success of Max and WBD’s commercial future, according to global streaming and games chief JB Perrette.

Source: Warner Bros Discovery

Perrette, speaking at the Morgan Stanley Technology Media & Telecom Conference yesterday, said that WBD would launch Max in markets where it can become a top three, profitable service in three to five years. Otherwise the company will license content to distributors, he said.

He identified India as a market where licensing made more sense. By contrast, WBD content “travels extremely well” in the UK and Australia, he added.

“Those are markets where we are confident we can meet the criteria of being successful in a relatively short period of time,” he said.

He said the company was “working actively” with its “long-standing partners” (Sky and Foxtel respectively) in those two markets “to reinvent the relationship  to help us launch our product…through a partnership with an existing player or in some cases with a new player who will help such that the economics of that transition from licensing to streaming doesn’t make it a cliff” so that high-margin revenues from licensing didn’t fall away to nothing, leaving WBD to build a streaming business from scratch.

However, while  finding partners who can deliver scale to streaming immediately makes sense, it is imperative for WBD to move to a direct-to-consumer model in markets such as the UK.

“This is a scale business, and in markets where we can deliver good healthy meaningful scaled profitable growth, it would be crazy not to do it…and in some of those markets we feel we are leaving money on the table,” he said.

Globalisation of streaming

JB Perrette

Perrette said that in general, globalisation of streaming is key to future growth.

He said that Max has just launched in LATAM but “we still have half the world still to go, and that that includes four out of the big five European markets, and all of Asia. Globalisation is probably the biggest single vector, and remember today that our business today from a revenue perspective is still 80% in the US, 20% outside the US. If you look at the leaders in the space that is completely inverted.”

Beyond international expansion, he said, an improved content line-up would be vital to growth, arguing that WBD had just come out of an extremely difficult period for content supply as a result of the Hollywood strikes. Originals had been pushed out from the fourth quarter, with a very “light slate” in the second half of the year.

That would be changed this year, he said, with multiple new seasons and series coming out, with a focus on tentpole titles based on “big, known IP”.

Advertising and password sharing

WBD is also launching a light, ad-supported tier in the third and fourth quarter in Europe and bringing in a crackdown on password sharing later this year and into 2025, he said.

Perrette said the upside for the planned crackdown on password sharing would not be at the same scale as the benefit accruing to Netflix, which had been in the streaming business far longer, but it would be significant.

Growth in streaming “lies in front of us”, with the company ahead of schedule to realise its goal of US$1 billion in EBITDA from streaming by 2025, Perrette said.

“Growth is going to come over the next two years as we launch in more markets with a better product with frankly the best content line up that we have ever had,” he said.

Perrette said he expected the overall market to become more rational, with more controlled spending on content and “rational pricing”, with fewer players doing “irrational deals both on the retail and on the wholesale side”.

In the US, he said, WBD would remain “in the top tier of services” despite “headwinds”. He said there was some potential for subscriber growth with ad-supported services “under-penetrated”. He said he also expected ARPU gains from an ongoing switch from wholesale to retail subscribers.

Sports on Max

Perrette said that the launch of sports on Max was “relatively recent” with penetration still “relatively low”.

“It’s great to have sport on Max…but if you are a real sports fan you want more,” he said. The US sports landscape was much more fragmented than that in other markets, so aggregation had a powerful appeal, he said, adding that this thinking also underpinned the sports JV planned with Fox and Disney. He said the sports offering on Max would be re-considered when the JV was launched.

“On the distribution and monetisation of content…we are making smarter decisions around windowing of content and we are not putting all of our eggs in one basket” such as streaming, he said.

The company is taking a broader view of windowing rather than focusing exclusively on streaming, with not only licensing but the networks side of the business remaining important.

Perrette said that the company had worked hard to “break down silos” over the first two years of the combined Warnermedia and Discovery business ahead of launching a combined streaming offering.

He said that WBD was “doubling down on games” on the theatrical side of the business, which he admitted had experiences many challenges. He said there was a belief that games represented a significant opportunity for the company going forwards.

Perrette said that the company had experiences “a much tougher time” on the theatrical side of the business than on the streaming side in recent times. He said that the opening of Dune and a “reboot on the theatrical side” was “reinvigorating the Warners content story”.