Although Warner Bros. Discovery (WBD) has been plotting its combined HBO Max, Discovery+ streaming service, a new report from The Wall Street Journal says a strategy shift is afoot and the latter could still be offered as a standalone service.
A Wednesday report citing people familiar with the matter said the strategy changed, as WBD became concerned over losing Discovery+ subscribers who might not want to pay more for a pricier combined service.
The plan up until this point had been to merge content from Discovery+, which features a variety of unscripted and lifestyle content, with the high production entertainment hits found on HBO Max. Sources told the WSJ that instead of being completely folded into the new streaming service, which will still feature HBO Max content and “most Discovery+” content, a version of Discovery+ would still be offered on a standalone basis.
Details such as pricing, timing and name haven’t been disclosed (although “Max” has leaked out as the frontrunner) for the combined service, which is anticipated this spring. Currently Discovery+ costs $4.99 per month with ads, and $6.99 ad-free, while HBO Max is charges $9.99 per month for its plan with ads and $15.99 per month for commercial free.
According to the report, shows such as “Shark Week” and content from Chip and Joana Gaines’s Magnolia Network would be kept on both Discovery+ and the forthcoming combined service.
WBD last year had been removing some HBO Max content such as “West World” and “The Nevers,” in some cases to find new homes, as it looked to save with content write-offs. WBD inked content deals with free ad-supported streaming (FAST) services The Roku Channel and Tubi TV, which got around 250 titles and 2,000 hours of on-demand content along with linear channels that included some of the former HBO Max content. Those deals also included the first WBD-branded FAST channels.
During 2022 earnings calls, WBD executives said they would be exploring launching a FAST service after the debut of the combined HBO Max/Discovery+ app.
And the WSJ cited sources as saying the free streaming service would feature content from the Warner Bros. studio as well as shows that originally ran on HBO and Discovery.
Competition in the streaming space has intensified with more ad-supported options hitting the market. In Q4 HBO Max captured the fourth-largest share of new streaming video users at 8%, behind Amazon Prime, Peacock and Paramount+, according to Kantar data. Discovery+ was at the bottom of the pack, garnering a 3% share.
The paid ad-supported or AVOD category (as opposed to free FASTs), grew the fastest in Q4, surging 17% over the prior quarter as the likes of Disney+ and Netflix launched plans with ads, and 33% year-over-year.
However, Kantar noted that the acceleration of AVOD indicates streaming viewers are looking to save money as they continue to stack an increasing number of subscriptions. And as consumers have more options for services, WBD could have concerns over losing Discovery+ subscribers because of increased prices for a combined service.
Kantar’s Q4 analysis found that planned cancellations of U.S. streaming remained steady at 5% of subscriptions, but drivers for users canceling shifted, with an increasing focus on price.
“With inflation being felt across categories, planned cancellation of streaming is increasingly driven by costs,” wrote Kantar. “Nearly 1 in 3 planned cancellations are now driven by wanting to save money, with another 15% driven by the price increases of streaming subscriptions.”
And plans with ads are more likely to churn, with AVOD subscriptions 57% more likely to be canceled in Q1 than SVOD subscriptions, often reportedly due to having too many services.
“The industry’s focus on AVOD is a double edged sword: it provides cost savings to streamers who may otherwise cancel a service, but it also creates a growing cohort of churners and switchers who tend to be less loyal when their repertoire becomes too big,” wrote Kantar.