After media companies have lost billions of dollars making the pivot from linear TV to streaming, CEO David Zaslav declared that Warner Bros. Discovery’s business is no longer hemorrhaging red ink.
“Here in the U.S., our streaming business is no longer a bleeder,” Zaslav said on the company’s first-quarter earnings call Friday. “It’s hard to run a business when you have a big bleeder.”
During the first quarter, WBD’s direct-to-consumer business range up operating income of $50 million. That contrasts with Comcast NBCUniversal, whose Peacock streaming service rang up a $704 million in losses in the first quarter.
“Look, we’ve turned the corner on our streaming business. We had a different view of it. We’ve focused on it very hard and we’ve built what we think will be a very strong, independent business and it starts with profitability,” Zaslav said.
WBD will be launching Max, which combines its HBO Max and Discovery Plus streaming services, on May 23. WBD's stock ticked up in mid-day trading on Friday.
“Our streaming business will be profitable for the year and we have real scale,” Zaslav said. “We know that as the economy improves, we'll see real growth.”
WBD is working to make subscribers’ transition from HBO Max to Max a smooth and easy one.
JB Perrette, CEO of WBD’s global streaming and games business, said getting HBO Max subscribers migrated to Max is one key metric the company will be looking at.
Three other key metrics will be brand awareness, customer satisfaction and customer engagement.
After that the company will be looking to add subscribers. “We obviously want to see subscriber growth and scale,” Perrette said. “Those are the way we look at success.”
Zaslav added that the real challenge to making the streaming business healthy is controlling churn.
“It’s very difficult to build a strong business with churn. The churn on Discovery Plus is quite low and the churn on HBO Max is high, and so driving that churn is as or maybe more important that driving the growth,” Zaslav said. “If we can drive down the churn, the growth will be very substantial.”
Perrette noted that churn on HBO Max hit a record low in the first quarter, but Zaslav said the level of churn was still in the unacceptable range.
Adding content from Discovery Plus should help get more members of the family engaged, which will help reduce churn, the executives said. Already, Discovery's Magnolia brand is among the top titles on HBO Max. And the company has plans to add news and sports to the product mix, which has been advantageous in Europe, Zaslav said.
Perrette added that WBD has added new technology to its platform that will help its fight churn.
“We had price rises in the U.S. as well as a few of the Latin American markets and the great news is we’ve seen much better reaction and much better retention as well as ARPU increases in those markets, and so that’s been a positive,” Perrette said.
