Zeiler: WBD ‘needs to launch’ Max in Sky markets

Gerhard Zeiler

Warner Bros. Discovery ‘needs to launch’ in the three markets where it currently has distribution deals with Sky, with the success of its content through its current licensing deal with the pay TV operator providing the evidence it needs to show the opportunity of going direct to consumers in these markets, according to Gerhard Zeiler, president, international at WBD.

Speaking at the MoffettNathanson Media, Internet and Communications conference last week, Zeiler said that Sky “was always a great partner for us” but “we want, we need and we will launch Max in these three markets”.

He declined to give more details on timing, but said that WBD would launch in the UK, Germany and Italy because “we see every single day that this content is working”.

He said that he was a Sky customer “for my London flat” and saw that price increases were justified in large part by the presence of content from WBD.

Zeiler said that WBD was still open to a relationship with Sky going forwards, but not based on licensing of content.

He said that WBD’s criterion for streaming was to be a top three player. In markets where that looks unlikely, it will continue to license content, he said.

Free-to-air strength and ad-supported SVOD

Addressing WBD’s strategy in Europe, Zeiler said that WBD’s streaming ad-tier is “very important” for its international streaming rollout, said Zeiler, because is provides a lower entry point for consumers, because it is attractive to distribution partners and because of the importance of the linear broadcast business internationally.

The launch of the ad tier means that WBD will be able to provide a unified advertising offering. In Europe, where it has a very strong free-to-air broadcast business, this will give it a big advantage, he said.

In the nine European markets where Max is due to launch, it will do so with an ad-supported tier that will enable WBD to present a more powerful ad proposition across both linear broadcasting and streaming.

Zeiler said that streaming internationally was growing at the same pace as in the US, but there were differences in viewing behaviour. Cord cutting had started later internationally was “not as steep” as in the US. Free-to-air broadcasting still accounts for over 50% of viewing in international markets in which WBD is active.

“That is a meaningful difference. On the other hand, pay TV is much smaller. The share of viewing on pay TV is under 10%…because pay TV penetration never achieved the size it did here in the US,” he said.

That meant that the linear free-to-air business remained highly important.

International revenues are now a third of WBD’s total, encompassing, studios, networks and streaming. Within that, advertising from free-to-air remains highly important, particularly in Europe, he said.

Latin America, where WBD is mostly present in pay TV, is different, he said.

Zeiler said that WBD had to “defend” its linear business in Europe because it would take time to build scale in ad-supported streaming.

“All three segments are meaningful,” he said, adding that streaming was “small, but growing” and one of the most important growth drivers in the future.

Early stage

Reflecting on the recent streaming bundling initiatives coming out of the US, Zeiler said that “we are big fans of bundling – it is better consumer experience”.

However, he said, it was important to focus on bundling with “traditional…and also non-traditional distribution partners”, rather than just with other streamers.

He cited operators like Canal+ and Telia but also NewBank, a big Latin American fintech outfit.

In Europe, WBD was bundling in hard bundles and soft bundles with multiple partners, he said, “to get really the best product for our streaming consumers”.

On WBD’s international rollout overall, Max is still “at a very early stage” in relation to the competition, being in only 50% of competitors’ addressable markets, with international revenue in streaming only accounting for 20% of overall streaming revenues – something that was not the case among competitors, said Zeiler.

He said that Max still has not launched in four of the major international markets – including two big English-speaking markets, the UK and Australia.

“You can’t be successful in streaming if you’re not global,” said Zeiler. “Otherwise you are really disadvantaged in terms of monetisation.”

He said that the international markets were “vital” for WBD’s streaming business.

On why it had taken so long to launch internationally, he said that WBD had to “get technology and product right” before launching its streaming proposition in Europe and other international markets. “Don’t launch if you’re not ready is lesson number one,” he said.

The second lesson is to have a compelling content offering. Having local content is “really essential” to have a “much better satisfaction for our consumers”.

The streaming launch in Latin America was complicated by different regulatory regimes and the fact that relatively few people had credit cards, but the launch had been “seamless”, he said.