Warner Bros. Discovery CEO David Zaslav warned on Thursday that consolidation in the streaming is coming – but rather than through mergers and acquisitions, he sees it coming in partnerships with streamers.
Zaslav, speaking at MoffettNathanson’s inaugural Technology, Media & Telecom Conference, expressed a willingness to bundle with other streamers if it means a better customer experience.
“For me, it seems very clear that if we were to package this great product that we have with others, if we were to wake up tomorrow and in each market if we’re the No. 1, 2 or 3 product, if we were marketed with two or three [streamers] for a specific price, it would be great for consumers and would probably reduce churn,” he said. “We’d both be marketing one product and it would provide a meaningful consumer experience. Not just on price but that ‘OK, I now have a bigger package of content that’s broader.'”
His comments come as WBD is preparing to launch its Max rebrand next Tuesday (May 23), which will combine the libraries of HBO Max and Warner Bros. Discovery and feature HBO, DC Universe and Harry Potter content. The combined service will offer three pricing tiers: Max Ad Lite for $9.99 per month, Max Ad-Free for $15.99 per month and Max Ultimate Ad-Free for $19.99 per month.
“One of the challenges in the business right now is the difficulty for a consumer in aggregating the content that they love, entertainment, nonfiction, content, sports content. Everyone’s googling where is it? How do I get it?” Zaslav said. “It’s not rational and it’s not really sustainable because it’s not a good consumer experience, not sustainable because there are a lot of people in this business that are just losing too much money.”
While he acknowledged that consolidation through M&A is “one answer,” he noted that it is “not easy” from a regulatory perspective.
“It takes time. This industry is changing so quickly. Saying I’m gonna take two years and then I’m gonna emerge with a new set of assets for two-and-a-half years, who knows what the world looks like,” he said. “So I think there’s a lot of risk from a regulatory or even a time [perspective], but there should be a consolidation. And I think it’s more likely to have to happen in the repackaging and marketing of products together. That’s what really I think makes sense. We have to as an industry reach that point.”
He argued that the current overall pricing of streamers has become “irrational” compared to cable.
“The streaming services doubled or tripled the offering of what they were doing and then they reduced price. People are paying a lot less for content now than they were. If there were 50 million people that like premium five years ago on basic cable, they’re paying a lot more money for HBO, Showtime, Starz, Epix, Encore than they are right now for these streaming services and the investment in content is three or four times,” Zaslav said. “That will all work out but the key for us is how do we create a product that people love and how do we get more people feeling nourished and loving that product? I think we’re really on to something with what we have and once you have that the ability to either raise price or provide sport and other product that they either spend more money on or that further enriches their experience on the platform. That’s a winner.”
Zaslav also warned that if the content owners themselves don’t do it, other platforms like Roku and tech companies like Amazon and Apple will.
“Whether we do it this year or in three years, I think eventually something like that will happen. If we don’t do it to ourselves, I think it’ll be done to us,” he said. “It’ll be Amazon that does it, it’ll be Apple that does it, it’ll be Roku that does it. They’re already starting to do it. And it makes sense. A lot of people will go to some of those platforms as an easier curation of finding what they like.”