In the last few days, Warner Bros. Discovery’s new streaming strategy seems to have come a little bit more into focus. The studio, saddled with tens of billions in debt as a result of the merger that added “Discovery” to the name, is desperate for cash, and it seems no movie is too sacred to license it out to another platform. The question is: does this strategy make sense, or will it do more harm than good?
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Max, nee HBO Max, was the fastest-growing streaming platform in the world when Warner Bros. was acquired by the much-smaller Discovery. To make the acquisition work, Discovery had to come up with $40 billion in cash as well as taking on another $3 billion in Warner debt. Given Discovery’s valuation of under $10 billion at the time, that means they had to leverage their own company significantly to make the deal happen.
The problem? HBO Max had been the passion project of the AT&T executives from whom Discovery bought the company. From the very beginning, Discovery’s David Zaslav seemed eager to de-emphasize the importance of the streamer to the company’s overall business plan. Almost immediately, he started slashing budgets for Max projects, and made it one of the most dangerous places in Hollywood to have a project you didn’t want cancelled.
A soft economy, some disappointing earnings statements, and a litany of unpopular decisions later, Discovery had lost about $20 billion in market cap for Warner Bros., meaning that they had taken on more than $40 billion in debt to acquire a company that was now worth about half of that. That’s…not ideal.
Streaming has been a problem for almost everyone. There’s a lot of money sloshing around in the streaming world, but most of it is going to the same handful of people and companies. It took Netflix years to become profitable, and back when, they were the only game in town. Now that there’s a seemingly-unlimited number of competitors in the market, the reality of streaming’s high costs have started to haunt people. Disney blames Disney+ failures for about $1 billion in losses, and even Netflix has introduced an advertiser-supported tier to make the math work.
Max’s subscriber growth also isn’t what it used to be: those same unpopular decisions that hurt the stock price, also alienated a lot of customers from Max. So while a couple of years ago, a massive boom in subscriber growth was fueling the illusion of security, that’s not true anymore. So, what has Warner Bros. Discovery done about it?
Earlier this month, we reported that The Matrix series — all four installments, including 2021’s The Matrix Resurrections — are now streaming at Peacock. That’s a valuable franchise for Warner Bros., and it’s safe to assume that a competitor paid a pretty high price to get those — especially since Resurrections had a day-and-date release on HBO Max, giving it at least the appearance of being a “Max original.”
Last night, fans realized that a number of big DC movies — including classics like Tim Burton’s Batman and more recent films like Black Adam and League of SuperPets — had moved to Prime Video. Again, this included a movie — Wonder Woman 1984 — that had debuted on Max during 2021’s day-and-date program. That program was, broadly speaking, popular with audiences, but unpopular with filmmakers. It helped drive record subscriber growth, but when that subscriber boom didn’t make Max profitable, Warner Bros. went back to business as usual in 2022.
Licensing some of the studio’s most valuable content to other streaming services makes a lot of sense on one hand: it builds liquidity, which is something Warner Bros. Discovery badly needs. For years, The CW operated at a loss, only turning a profit once they collected license fees from Netflix, where most of their shows were streaming at the time. So it’s clearly a business model that works. So…why are we even writing about it?
The idea of licensing DC movies, and other huge Warner Bros. IP, to competing streamers really gets to the heart of a question that has come up again and again in the last year or so: at the end of the day, what is the “point” of company-owned streamers like Disney+ and Max, from a consumer point of view?
Disney+, Max, and other studio-owned streamers were sold to the audience as a one-stop shop for all your [insert studio name here] needs. The idea was that eventually, all of the company’s biggest and most beloved movies and TV shows would live on the same streaming platform, and you could pay a modest monthly fee for access. The idea was, in part, to simplify the often-confusing map of the streaming universe. Instead of Googling “where is Black Panther: Wakanda Forever streaming?,” you would know the answer, just by virtue of it being a Marvel movie.
That wasn’t only good for consumers, it was also good for studios, since in theory it would help strengthen and clarify their brands in the public imagination. That is probably why Disney, who is better than anyone at brand consistency, hasn’t started licensing stuff away for quick cash yet.
But streaming video is expensive, and Discovery figured out a new way to save not only on data hosting fees, but also on royalties that would be due to Warner employees: nuke movies and TV shows from orbit, removing them from Max and leaving them nothing but a memory. This was the most notable, and least popular, of Warner Bros. Discovery’s choices when it came to Max, but it was one that other studios have imitated since. The idea of Willow or Grease: Rise of the Pink Ladies or Aquaman: King of Atlantis simply vanishing from their respective platforms, never to be seen again, rubbed fans the wrong way. The very notion seems to fly in the face of the promise of those streamers, and inevitably, the trend has led to a spike in conversations around the importance of physical media to film and TV preservation. If something doesn’t exist on DVD, and a company can just decide to dump it down a memory hole, did it really even exist in the first place?
This is a lot of words to raise the question: What’s next for Max? If Warner Bros. is open to licensing away some of its best and most in-demand content, what will keep subscribers coming back? The app’s reputation and user experience have already taken a hit, with the removal of the HBO branding and the addition of an ocean of cheap, low-effort Discovery content that waters down the overall identity of the brand. With Warner Bros. staples also moving off to Peacock and Prime, what, to return to the earlier question, is the real point of Max?
That’s not an entirely fair question, but it’s one people are necessarily going to ask. Obviously, it’s still a big service, with a lot of things to offer, and it still has plenty of the big Warner Bros. hits. It’s not without some appeal. But a recent survey found that roughly half of American streaming subscribers feel like they are paying too much for too little, and that they are carrying too many streaming subscriptions. That suggests that by watering down its brand identity and reducing its library, Max puts itself on the chopping block for many subscribers.
Sound off with your thoughts below, or hit up @russ.burlingame on Threads to talk about the mess that is the streaming media landscape in 2023.
