What in the name of Bran the Broken is going on? After three years of talking up HBO Max, AT&T is looking to unload their entire media empire and combine it with Discovery Media. Fresh off reports that the long-awaited Friends reunion special was done filming, Warner Media might be getting new roommates who will be able to totally change the look and feel of their home. That’s because as Bloomberg reported Sunday, Discovery and AT&T are in the process of making an exchange that would sell off the entirety of the Warner Media portfolio to Discovery Networks in order to form a new company and let AT&T go back to concentrating on being a communications company again instead of a hybrid communications/TV channel distributor/content owner. Having already spun off its branded TV pay-TV distribution channels U-Verse, AT&T TV, and DirecTV, AT&T apparently decided that it would be better off going back to its roots before they withered up from lack of attention.
In the end, it will put two major streaming properties in one place along with a TV and film studio. Discovery Networks which owns a vast array of educational and entertainment channels built around reality and documentary-style TV will now also house TNT, TBS, CNN, HBO/HBO Max and The Cartoon Network. Discovery launched it own very successful streaming outlet, Discovery Plus early in 2021 building on both library content from its numerous networks like HGTV, Discovery Channel, TLC and Food Network while also combining programming from A&E Networks via a partnership with Disney. What will happen with both streaming apps going forward? There are a couple of scenarios that could play out.
They all stay separate
Just because you own multiple things does not mean you have to integrate them. This is what Warner Media is attempting to do with HBO Max. The service combines HBO with all of the other properties that Warner Media acquired over time including Turner’s movie archive, comedy programming from TBS, DC comics content etc. Over time the service has grown in popularity but suffered from a sloppy rollout and a bit of brand dissonance. What exactly does TBS programming have to do with theatrical releases? And what do either of those things have to do with Studio Ghibli? There is already a lot to unpack with HBO Max. Discovery+ on the other hand is vast but neatly organized. Subscribers know what is there and where to look for it and best yet can understand why it’s there. The new company can advertise HBO Max during Discovery Network programming and through the ad-supported version of Discovery+. The two services could also be promoted in a bundle similar to how Disney is promoting Disney+, Hulu and ESPN+ as three separate services/apps with one price.
The branding of both assets is so different it will be a lot easier to explain if you don’t try and put the stars of Fixer Upper on stage with the stars of West World and say we are the same.
Discovery Sells Pieces Off
Warner Media is more than HBO and those Turner TV channels. It also owns DC Comics, Warner Brothers TV and Film Studios. Most of the brands in Warner Media used to be separate entities but through mergers, over the past 30 years, they have all come together. Are they all worth keeping? They may not be. What Discovery will value the most and understand how to use will be key. But one thing is for sure. No matter what they say about the deal once it is finalized you should not expect the company to look the same a year later.
New Skinny Bundle
Right now there are a number of major players in the cable replacement world. Hulu with live TV, YouTube TV, fuboTV, Sling TV and Vidgo. Within that same relm is an entertainment branded service called Philo which offers 60 plus channels of entertainment and educational programming without offering news and sports channels. There are others in this space with an even more narrow focus. Discovery could technically put all of the content from both Warner Media’s soup and Discovery+ together into one big service offering reality-based entertainment and premium content. It could offer live feeds of all of Turner’s content along with all of Discovery Network’s content with a huge on-demand library built-in. It could then contract out other services to fill in the gaps like ESPN etc. Would it want to do that? We don’t know. At the moment we know people are cutting the cord on traditional services, but the jury is still out as to if there is a big enough audience of disaffected cable subscribers to support multiple replacements. It could also be like Philo on steroids.
Another possibility would be to try and put everything in one pot and stir it up. Discovery certainly has enough cooks on its roster to attempt to make a casserole out of all of it. There could conceivably be one giant streaming service built around all of the assets in place on both services. One place to watch the latest Warner Brothers content, TNT dramas, decorating shows, cooking competitions, premium adult entertainment, and more. But are the audiences for two such services the same?
There is this narrative around competing with Netflix and Disney. People keep asking how can we put something together that can compete with the scale and the scope of those services. But there really may not be any way to compete with them. Netflix is the original streaming service and it is such an established brand that the only thing competition might be able to do is hope it runs out or money. Disney is not going anywhere. Its recent announcement of 103 million Disney+ subscribers after less than 2 years was considered a disappointment. It’s more like how do we offer value alongside these brands? I don’t know if the new company would want to put its popular Discovery-based content behind a higher paywall. $4.99 for ads on Discovery+ has proven popular as a starting point. It might be a tough sell to promote a new service that costs $18.00 or more and tell customers but now you get all the stuff on that other service that you intentionally avoided because we are in one big family.
What we think should happen
- The new media company should aim in a couple of directions. First of all, it is a TV company. It should use the rights to its TV channels as leverage with TV operators (cable companies and cable replacements). Now it can include HBO, TNT and so on with its sports programming and premium content in negotiations with HGTV, DIY, Animal Planet, etc. As long as the traditional TV business can hold up it might as well cash in.
- Keep the services separate. There is not a pent-up demand for a service that combines HBO Max and Discovery+. The content on the two services is so different. Sure there has to be some crossover. But it’s not obvious. By keeping them separate it retains the ability to bundle the services together under one plan as mentioned concerning Disney. Just like the same service that offers The Mandalorian does not offer the Hand Maid’s Tale, the same service that offers my 600 Pound Life doesn’t have to offer the Sopranos. But if customers want to save a little money by getting them both then the more the merrier. This way customers who are looking for the niche content that both services provide can do so without interruption or confusion.
- Discovery should figure out whether licensing shows is profitable. Netflix made its name licensing shows on its first of its kind streaming service and AT&T decided it needed to do the same by scooping up the rights to The Big Bang Theory and Friends in order to pair them with Godzilla and Game of Thrones. Discovery needs to look at deals like this and see if they actually increase subscribers. Do people say well I could care less about watching movies debut at the same time they do on the big screen but I will pay anything to watch reruns of a 30-year-old show. Netflix has gotten very strategic on this front while other startup services try and recatch lightning in a bottle. But for all the money spent on Friends and The Big Bang Theory, it’s shows like The Watchmen and Movies like Godzilla Vs Kong and Zack Snyder’s Justice League that got all the headlines and buzz. In the end, does anyone really think of HBO Max as the home of The Fresh Prince of Bel-Air? Win the battle not the press conference.
- Keep Warner Brothers Studio in the fold but put someone who understands the movie and TV production business firmly in charge of it. Allow it to be a key pipeline for HBO Max. But do not put Discovery Networks TV brands under the umbrella of Warner. They have a look and feel all to themselves.
- Copy Disney and start a DC Comics studio to be in charge of the entire narrative behind DC comics-based TV and movie projects with a strategy of building out one vision. This will do so much to fix the herky-jerky nature of the DC Comics-based movies which appear more influenced by how the last movie does than by any uniform narrative or plan. Let comic book writers and creators decide the fate of the characters that have been nurtured for 80 years be key in writing the movies and TV shows and finally build a cohesive on-screen multiverse that blends its existing properties together in a logical way. Marvel has been a goldmine for Disney. There is no reason DC can’t be the same. It just needs the same kind of support.