HBO Max is going through some changes right now, in the wake of Warner Media's merger with Discovery. While the big news has been that the streaming service will eventually merge with Discovery Plus, comments from one key executive now suggest that we may have some price rises to endure at some point in the future.
Gunnar Wiedenfels, Warner Bros. Discovery’s Chief Financial Officer, hinted at this when speaking at the Goldman Sachs Communacopia Tech Conference on Tuesday (via CNBC (opens in new tab)). Wiedenfels said that HBO Max and Discovery Plus are “fundamentally underpriced” and that the company could have “ample room” to raise prices.
Wiedenfels believes this is the case based on the strength of both services’ content libraries, and comes off the back of HBO Max winning 38 Emmys — more than any other streaming service. And that doesn’t include Warner Bros-made content for other services, such as Ted Lasso and Abbot Elementary, which also won awards at the show.
According to The Hollywood Reporter (opens in new tab), Wiedenfels used House of the Dragon as an example of how HBO Max could use marquee content to bring in audiences, noting that 30 million people have seen the debut episode already. HBO Max also crashed after the Game of Thrones spin-off's debut (opens in new tab), under the weight of everyone trying to tune in for the first episode.
Wiedenfels did note that both HBO Max and Discovery plus aren’t perfect, but said that the merger can benefit them both, arguing that HBO Max has “the amazing content offering” and “a lot more of the must-have features,” while Discovery Plus has a cleaner interface. So the idea is that the merger will see the best of both services combined into (hopefully) something better.
The CFO also highlighted another of Discovery Plus’ strengths, namely that it offers “evergreen popularity.” There may not be “extreme buzz” around big shows that drive people to the service, but it has “among the lowest churn rates in the industry..
In short, once people subscribe to Discovery Plus they tend to stick around — something Wiedenfels attributes to brands like HGTV, Food, Magnolia and Discovery itself. So with an “evergreen” appeal, the Discovery Plus/HBO Max hybrid should still have appealing content even during periods where there are no big HBO shows on the air.
That’s all well and good, but it doesn’t change the fact that Wiedenfels hinted at possible price increases. HBO Max already costs $15 a month without commercials (or $10 with them), making it one of the more expensive on-demand streaming services available. Meanwhile, Discovery Plus costs $5 a month with ads, and $7 a month without them.
Combined, that’s $15 to $22 a month, which doesn’t sound “undervalued” to me. In fact, it’s pretty darn expensive, and more than you’d pay for any other streaming service that didn’t include Live TV and that potentially had ads. Given the current cost of living situation, I can’t imagine subscribers would respond particularly well to the prospect of paying more.
However, Wiedenfels confirmed that Warner Bros. Discovery has changed its tune since the merger, and isn’t prioritising subscriber growth over profitability. Instead, the company is doing the opposite, namely working to ensure its streaming business actually makes money.
Apparently, focusing on subscriber numbers is “old world streaming” thinking, so it might not worry the company if a few people jump ship. We’ll have to see how that plays out, though.