WBD expands cost-cutting target & accelerates new streamer launch, as subs hit 94.9 million

Batgirl

Warner Bros. Discovery (WBD) has accelerated the US launch of its upcoming combined HBO Max and Discovery+ streaming service, while increasing its savings target to $3.5bn.

Speaking on the company’s Q3 2022 earnings call yesterday, president and CEO David Zaslav said that the launch had been brought forward from summer to spring 2023.

Noting that WBD has added 2.8 million subs globally across its DTC platforms this quarter, for a total of 94.9 million worldwide, Zaslav said that the company expects a “healthy inflection” upon launch of the new service.

He explained that it is “actively experimenting and testing our hypotheses about the future product” by placing content from the existing services on to their counterpart – such as Magnolia Network shows added to HBO Max, with Fixer Upper: The Castle becoming “a top five show” after only its first few days on the service.

The combined streamer will launch in the US in spring, followed by Latin America later in 2023, then Europe and APAC, though no specific dates were mentioned.

“We see significant opportunity across the globe and we’re excited to resume expanding our distribution in countries where we are currently not represented.,” explained Zaslav, adding: “As you would expect, we made the strategic decision to hold off on active expansion until our new offering is set to launch.”

David Zaslav

Increased cut-backs

Overall WBD revenue was $9.82bn in Q3 2022, which was below Wall Street expectations. The company reported a net loss of $2.3bn, including $1.92bn of pre-tax amortisation from acquisition-related intangible assets and $1.52bn in restructuring costs.

Offering an update on the company savings target, Zaslav revealed WBD is now aiming for $3.5bn of cutbacks, $500m higher than previously announced.

Zaslav said that WBD is “fundamentally rethinking and reimagining how this organisation is structured”, which will be “reflected in our numbers and some of the strategic decisions we are making.”

The cost-cutting efforts have already seen content written off and staff levels slashed, with the latest wave of redundancies hitting around 125 positions at Warner Bros. Television Group (WBTVG) as part of the ongoing restructuring. The company laid off 14% of HBO and HBO Max staff – around 70 people – in August, with unscripted and live-action family programming hit the hardest.

TBI revealed earlier this summer that WBD was also in the process of making deep cuts across Europe, with the originals division led by HBO Max EMEA chief Antony Root set to be closed by the end of the year.

Defending these measures, Zaslav said: “It’s challenging, but it’s taken real courage to restructure this company. It hasn’t been restructured and reimagined for the future in a decade and a half.”

Regarding the cut content, Zaslav told stakeholders that “We didn’t take one show off a platform that was going to help us in any way. It’s going to help us to get it off the platform so that we [can] replace those shows with content that has a chance to be more successful.”

Adding some extra detail, WBD CFO Gunnar Wiedenfels said that WBD expects to have saved $750m by the end of this year, and an incremental year-over-year of $2bn in 2023.

James Gunn

AVOD & DC

Zaslav also reiterated the company’s commitment to “aggressively” attack the AVOD market with its own FAST offering in 2023, noting that: “As a company with the largest film and TV library in the industry, we have a unique opportunity to increase our addressable market and drive real value, and we plan to move quickly.”

Shedding some more light on WBD’s AVOD plans, Zaslav suggested a service would make use of the company’s unused library content: “We have an extraordinary library: Friends, The Big Bang Theory, Two And A Half Men. There’s 15 or 20 series that are loved and used and are nourishing the audience on a regular basis.

“But then there’s a huge number of series and movies that aren’t being used at all. And so the ability to see over the last year and a half, what’s happened to that entire library of motion picture and movies and to see that if none of its being used, why aren’t we putting it on an AVOD, where it will be used?”

Zaslav talked up the recent appointment of James Gunn and Peter Safran as the new heads of DC Studios, revealing: “I spent a lot of time over the last few months with James and Peter, talking about our strategy and long-term plans for the future of DC across TV, animation and film.”

With their appointment coming on the heels of the decision to can HBO Max’s Batgirl movie due to questions over its quality, Zaslav said that the exec duo have “a powerful vision and blueprint that will drive a more unified creative approach.”

Zaslav also used the call to take a swipe at the SVOD-centric business model, touting WBD’s mixed economy approach: “I was recently asked if I thought the golden age of content was over and I said absolutely not. There’s nothing more important than content. People are consuming more content than they ever have, but it has to be great content. It’s no longer about how much, it’s about how good.”

“I believe the grand experiment, facing subs at any cost is over. Let’s face it, the strategy to collapse all windows, starve linear and theatrical and spend money with abandon, while making a fraction in return on the service of growing sub numbers, has ultimately proven in our view, to be deeply flawed.

“We believe there was a real opportunity to do things differently, to deliver the content consumers want and will pay for, while getting the full value of our offering.”