August 16, 2022


Warner Bros. Discovery a company

WBD 4.61%

The company’s CEO is exploring launching a free, ad-supported streaming service, the streaming giant’s latest effort to reach a wider audience as competition for users intensifies.

The new company, the result of Discovery’s merger with AT&T Inc’s WarnerMedia. Earlier this year, it will focus first on Executives announced a plan to combine the two major streaming services, HBO Max and Discovery+, during a call with investors. JB Perrette, CEO of the global broadcasting company, said the combined subscription platform will be rolling out starting in the US next summer.

CEO David Zaslav said that once the service is launched, the company sees the potential to offer a free ad-supported offering. The free service, he said, will cater to cost-conscious consumers and will serve as an “entry point to our premium service.”

The announcement came as Warner Bros. Discovery reported its first quarterly profit as a combined entity, leading to a loss due to merger-related fees and warning investors that slowing advertising has lowered its forecasts for this year and next.

The company’s shares fell 12% in after-hours trading.

As the number of streaming options has increased in the past three years, many companies are looking to offer lower cost versions of their services in a bid to boost their user base. The biggest players in the industry, Netflix Inc. and Walt Disney a company

Disney+ is working on low-priced, ad-supported versions of their platforms.

The exploration of the free streaming service is the latest example that new management – led by Mr. Zaslav – is well prepared to depart from the company’s approach when it was controlled by AT&T and led by Jason Keeler.

Mr. Zaslav has acted quickly since taking office in April. This included pulling the CNN+ plug days off the job – and just weeks after launching the streaming service – as well as canceling movies and shows that had been approved by the previous leadership. The company decided earlier this week not to release the superhero movie “Batgirl” despite the fact that it has already been filmed.

“We will not be putting out a movie unless we believe in it,” Mr. Zaslav said during the call.

Mr. Zaslav said the company’s new approach is to focus more on quality content. “It’s not about you,” he said. “It’s about how good the quality is.”

Warner Bros. declined. Discovery – whose holdings include the Warner Bros. film studio. And cable channels TNT, Food Network and HGTV – plus HBO and CNN – posted a $3.42 billion loss in the second quarter, which they said was due in part to fees related to the merger. Revenue was approximately $9.83 billion.

Chief Financial Officer Gunnar Wiedenfels warned investors that the company is adjusting its financial forecasts for 2022 and 2023 in part due to the macroeconomic environment affecting advertising.

2022 will clearly be a transitional year,” said Mr Weidenfels. The company expects global advertising sales to fall in the third quarter of the year “by a high single-digit ratio to low double-digit,” he said.

Weidenfels said the company now expects adjusted EBITDA of between $9 billion and $9.5 billion this year and at least $12 billion in 2023. The company previously forecast adjusted EBIT of $10.2 billion for this year and $14 billion for next year.

Warner Bros. said. Discovery has 92.1 million subscribers across its streaming platforms, up about 1.7 million from the first quarter. That compares with 220.7 million for Netflix and 205.6 million for Disney, whose services include Disney+, Hulu and ESPN+, according to the companies’ latest figures.

The streaming landscape has become increasingly fragmented in recent years, giving users a range of options. HBO Max, Discovery +, Disney +, and Apple a company

+ Apple TV and Comcast a company

Peacock has been in the business since 2019, while Paramount Global has rebranded and expanded its CBS All Access service, now known as Paramount+. All of them are fighting for market share with more popular players including Netflix, Hulu and Amazon.com a company

Prime Video.

Among these services, Peacock already offers a free, ad-supported tier of its platform, and competes with a host of other players including Fox Corp.’s Tubi, Paramount Global’s Pluto TV, Amazon’s Freevee, and Comcast’s Xumo. Long a mockery of second-class citizens, these services have grown exponentially within reach, while the biggest player in streaming, Netflix, has lost subscribers for two consecutive quarters.

Mr Perrett said that the content on the Warner Bros. Free Discovery will be significantly different from what will be in the future for HBO Max and Discovery + subscribers. “The difference is completely different,” he said.

Besides exploring a free streaming platform, Warner Bros. Discovery said Thursday it is looking to raise the prices of its subscription products and move away from deeply discounted offers.

“We are not in the business of trying to get every subscriber, we want to make sure that we are getting paid and that we are getting paid fairly,” said Mr. Zaslav. “We want to increase profitability and free cash flow.” Perrett said price increases will occur in some international markets. “We will also plan to increase periodically as is acceptable in the market.”

Dealing with the company’s heavy debt burden — $53 billion at the end of the second quarter — remains high among Warner Bros.’s priorities. Discovery. Mr. Weidenfels said the company will allocate all the free cash flow it generates to pay off its debts. The company expects to generate $3 billion in free cash flow in 2022.

“We will repay $6 billion in debt by the end of August,” Mr. Zaslav said during the call.

write to Lillian Rizzo at [email protected]

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