A team of Wall Street pros throw kindling on the speculative M&A fire, suggesting that the David Zaslav-led company should spin off its linear TV brands into a new company saddled with debt.
www.hollywoodreporter.com
There's a growing recognition that WBD's strategy, largely centered on Max, isn't working. Some of you say that the HBO name should never have been taken from their DTC streamer's branding. But I now think the problem is more fundamental than that: it simply shouldn't include HBO at all. Max is an unwieldy combo: lots of premium stuff (HBO), lots of cheap reality stuff (Discovery), plus the third-most-popular national news network (CNN). But there's just not enough new/recent scripted series serving those mainstream (non-HBO) viewers. Who exactly is Max supposed to be for? It's a weird grab-bag of content and that makes for a very muddled marketing proposition.
These traditional studios have to look at what has made them rich in the first place -- the traditional cable bundle -- and try to replicate that the best they can for the DTC streaming era. The problem with the big cable bundle (starting at $73) is that, relative to Netflix ($7 w/ ads; $15.50 - $23 ad-free) and Disney+Hulu ($10 w/ ads, $20 ad-free), it's just too expensive. There's only value in the bundle if you watch a broad array of the content it offers -- mainly sports, plus local and national news, entertainment shows here and there -- and want it all put together in one convenient UI. There will continue to be a decent chunk of US households for whom that's true, but it will soon be (or maybe is as of this summer) less than 50% of them.
To sell their content to the rest of us, these traditional studios have to pool their content together -- as they've always done via the cable bundle -- but this time without MVPD middlemen (e.g. Comcast, DirecTV) and in the form of mini-bundles that appeal to specific groups of viewers.
The cost of sports is largely what has driven up the cost of the big cable bundle. So it makes sense, when putting these new mini-bundles together, to mostly segregate sports off into its own service/app. (Note that this is what Disney plans to do with the forthcoming standalone ESPN DTC launching in fall 2025.)
Second, it makes sense to segregate your premium content off into its own service/app too, because that content fetches a higher profit margin -- affluent consumers are always willing to pay a premium for perceived quality. This kind of content may never appeal to a majority of US households -- Succession and The Righteous Gemstones are not the same as Young Sheldon and NCIS -- but that's OK. Most households do not want to be forced to pay extra for this kind of content that they won't watch. Keep in mind that premium services like HBO and Showtime were always sold as optional add-ons to the basic cable bundle, not as unavoidable parts of the bundle itself. Let history be your guide. Stick with what works.
That leaves us with the third mini-bundle: everything else, i.e. basic broadcast/cable entertainment and news. This is the mainstream service that offers a variety of content appealing to a solid majority of households: accessible/broad scripted shows, kids shows, reality/game shows, national and local news, documentaries, old favorite shows and movies. I would also add the most popular sport in the US: NFL. That would be the only sport appearing in this service and it would, of course, also air on the sports-only mini-bundle service.
This is the way forward for WBD, Paramount and NBCUniversal. Max, Paramount+ and Peacock are all broken objects that can't be tweaked into profitability on their own. One way or another, they're going to have to consolidate. It would be better for them to do it voluntarily, via agreed-upon negotiated terms, rather than long painful deaths in the market followed by fire sales.
