Warner Bros. Discovery (WBD) broke the trend of streaming publishers reporting positive gains last quarter.
The studio’s overall revenue for Q1 dropped 7% year over year to just under $10 billion, missing analyst expectations. Total company ad sales also dipped 7% YOY. Though WBD considers this an improvement from Q4 last year, when revenue was down 9% YOY.
But it’s not all bad at WBD.
Max, which combines HBO Max and Discovery+ content, gained 2 million subscribers last quarter, bringing the total account base to nearly 100 million. Thanks to that sub growth, average revenue per Max user rose 4% YOY to $7.83.
On Wednesday, ahead of the earnings call, WBD announced that Max will be part of a new bundle offering with Disney+ and Hulu, launching in the US over the summer. Which is one of two “catalysts” for WBD’s growth going forward, CEO David Zaslav told investors during the company’s earnings call on Thursday. The other is an aggressive international expansion of Max that will unfold over the coming year.
Joining forces with the Mouse House
If that news drop sounds familiar, it’s because TV content bundling is resurfacing as a streaming tactic to reach more subscribers and, in turn, grow ad revenue.
Max’s new bundle offering with Disney+ and Hulu is just the latest example.
The bundle will be available both as an ad-supported and ad-free offering. WBD didn’t share what this bundle will cost consumers, but Zaslav said to expect a “very attractive price” for both tiers.
According to Zaslav, Max shares only a “modest overlap” with Disney+ and Hulu, which means “we have an opportunity to drive incremental subscriber growth.”
And Disney+ is growing its subscriber base much more quickly than Max, gaining 6.3 million subs last quarter, compared with Max’s 2 million. “We expect this product will help increase [subscriber] retention and lower churn,” Zaslav said.
With healthier subscriber growth, WBD also expects this bundle to help it keep raising its average revenue per user, Zaslav said.
Max goes global
Beyond the US, WBD is laser-focused on “meaningfully expanding” Max’s global presence, Zaslav said.
Since the beginning of the year, WBD expanded from a single market in the US to 39 countries and territories, Zaslav said. And over the summer, Max will grow further to more than 25 additional markets in Europe, starting with France and Belgium.
Europe is currently a “bright spot” in WBD’s ad revenue growth, and Poland, Italy and Germany are “notable outperformers,” said CFO Gunnar Wiedenfels. Naturally, as with most streamers these days, WBD expects sports to contribute to subscriber and ad revenue growth in Europe, where subscribers will be able to watch the full Paris Olympics via Max this summer.
For WBD, business in Latin America is also growing since it finished migrating the HBO Max subscriber base to Max, even though LATAM is a “materially smaller market” compared to Europe and the US, Wiedenfels said.
Overall, WBD sees a “significant opportunity” to monetize its ad supply with an international subscriber base, Wiedenfels said.
In terms of both content and strategy, “we’re laying the groundwork from which we expect to build a more profitable direct-to-consumer [business],” Zaslav said.
“We’re still just scratching the surface of our long list of to-dos that we see as catalysts for growth,” he added.
