Warner Bros. Discovery Upends Nascent HBO Max International Management

Consummation of the WarnerMedia, Discovery merger into Warner Bros. Discovery continues to impact HBO Max senior management.

Johannes Larcher and Luis Duran, only recently hired GMs of Max international and Latin American operations, respectively, are reportedly leaving the company.

Larcher, who joined WarnerMedia in July 2020 to oversee Max’s international rollout, confirmed his departure on LinkedIn. Max ended the most-recent fiscal period with 76.8 million subscribers when combined with the HBO pay-TV network.

“I’d be lying if I said that I’m not sad about soon leaving Warner. Bros. Discovery. The new company has such an amazing opportunity ahead of itself, and I wish Jean-Briac Perrette, [newly hired CEO of Warner Bros. Discovery Global Streaming and Interactive], and the new leadership team nothing but the best as they take the helm,” Larcher wrote in a May 13 post.

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In a separate post, Manuel Urrutia, SVP of HBO Max global expansion strategy and operations and head of marketing HBO Max EMEA, lauded the achievements of Larcher, Duran and other departing staffers.

“Saying that yesterday was a tough day is a euphemism,” wrote Urrutia. “Thank you, Johannes for your leadership, guidance, and friendship. Our company is forever indebted to you. Thank you, Luis Duran, Jason Press, Sarah Lyons, Brad Wilson. Your achievements were nothing short of spectacular.”

Warner Bros. Discovery, BT Group Launching Live Sports Joint Venture in U.K., Ireland

U.K. telecom operator BT Group and Warner Bros. Discovery May 12 announced the formation of a joint venture to create a new sports streaming/broadcast platform for the U.K. and Ireland. The deal includes the transfer BT Sport’s business operations to Warner Bros. Discovery.

Combining the sports content of both BT Sport and WBD-owned Eurosport U.K., the JV will have one of the most extensive portfolios of sports rights, including UEFA Champions League, UEFA Europa League, the Premier League, Premiership Rugby, UFC, the Olympic Games, tennis Grand Slams featuring the Australian Open and Roland-Garros, cycling Grand Tours, including the Tour de France and Giro d’Italia, and the winter sports World Cup season.

BT Group ended 2021 with about 18 million subscribers, while French-based Eurosport has more than 190 million subs across Europe.

BT will receive £93 million ($101.5 million) from WBD and up to approximately £540 million ($660.7 million) by way of an earn-out from the JV, subject to certain conditions being met.

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WBD will be granted a “call option” over BT’s interest in the JV, exercisable at specified points in the first four years of the JV. The Transaction is subject to customary closing conditions, including approvals by the relevant regulatory bodies and is expected to complete by the end of 2022.

Current BT Sport subscribers who access content through BT directly, and the majority of BT’s pay-TV customers will get access to Discovery+, the non-fiction entertainment streaming service, which is home to Eurosport’s live and on-demand streaming in the U.K. and Ireland.

Both BT Sport and Eurosport U.K. will initially retain their separate brands and product propositions in the market before being brought together under a single brand in the future. BT Group and Warner Bros. Discovery will enter into distribution agreements with the JV under which they will distribute the combined sports content to new and existing customers on their respective platforms and apps.

“We’re excited to be joining forces to bring the best of BT Sport together with Eurosport U.K. to create a fantastic new sports offer alongside all the entertainment that discovery+ has to offer BT customers,” Marc Allera, CEO BT’s consumer division, said in a statement.

The deal constitutes a class 2 transaction for the purposes of the U.K. Financial Conduct Authority Listing Rules and, as such, BT Group shareholder approval is not required.

Lazard is acting as exclusive financial adviser to BT Group and CMS Cameron McKenna is acting as legal adviser to BT Group. DLA Piper is acting as legal adviser to Warner Bros. Discovery.

“[The JV together] with our growing portfolio of premium entertainment content promises to deliver consumers a richer and deeper content proposition, not only providing greater value from their subscriptions but bringing sport to a wider entertainment audience,” said Andrew Georgiou, managing director of Warner Bros. Discovery Sports Europe.

Discovery+ SVOD Launches on The Roku Channel

Roku and Warner Bros. Discovery May 10 announced that nonfiction subscription streaming service Discovery+ has launched on The Roku Channel. Available in the U.S., users can now subscribe to both the ad-free ($6.99) and ad-supported ($4.99) versions directly through The Roku Channel.

Discovery+ offers 70,000 episodes of current and classic shows from a portfolio of networks, including HGTV, Food Network, TLC, ID, OWN, Travel Channel, Discovery Channel, Animal Planet, and Magnolia Network, as well as more than 200 Discovery+ original titles.

Users of The Roku Channel can now browse Discovery+ content before signing up, and enjoy a free seven-day trial, no extra apps or other fees required. Once registered, users can stream content from within The Roku Channel.

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“The launch of Discovery+ on The Roku Channel makes it easy for our users to access this compelling content, while enabling Discovery to reach incremental audiences,” Rob Holmes, VP of programming at Roku, said in a statement.

Launched on Jan. 4, 2021, Discovery+ ended the most-recent fiscal period with 24 million subscribers.

“We’re pleased to deepen our relationship with Roku, a valued partner, and expand access of Discovery+ on the Roku platform,” said Gabriel Sauerhoff, SVP of digital distribution and commercial partnerships for Warner. Bros. Discovery.

With the merger of WarnerMedia and Discovery, it remains to be seen how Warner Bros. Discovery melds Discovery+ with HBO Max.

“We look forward to further extending the reach of our exceptional library of lifestyle and real-life content to millions of Roku streamers and providing them increased optionality in how they access Discovery+,” Sauerhoff said.

Warner Bros. Discovery Touts 24 Million Discovery+ Streaming Subscribers; 100 Million With HBO, HBO Max

Warner Bros. Discovery April 26 reported 24 million first-quarter (ended March 31) direct-to-consumer subscribers, which largely includes the Discovery+ streaming service, up 2 million subs since the end of Q4 on Dec. 31, 2021.

When including 76.8 million HBO and HBO Max subscribers, the company now has more than 100 million SVOD subs worldwide.

WBD, which is the new corporate moniker following the April 8 closing of the $43 billion asset combination between WarnerMedia and Discovery Inc., did not include WarnerMedia results in its first-ever quarterly fiscal report.

The Discovery+ streaming platform helped WBD up U.S. distribution revenue 11% to $886 million from $796 million in the prior-year period. Internationally, the SVOD, along with foreign properties Eurosport.com and Global Cycling Network, helped up distribution revenue 4% to $536 million, from $514 million in the prior-year period.

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When including advertising revenue, U.S. Networks revenue increased 7% to more than $1.9 billion from $1.8 billion primarily due to higher pricing and the continued monetization of content offerings on the company’s next generation initiatives, partially offset by secular declines in the pay-TV ecosystem and lower overall ratings.

In the company’s first fiscal call, CEO David Zaslav said ongoing internal restructuring would continue to put a focus on monetizing “everything,” not rolling back the theatrical window on Warner Bros. Pictures movies, and not outspending the competition (i.e., Netflix) on content.

“When you open a movie in theaters, it has a whole stream of monetization,” Zaslav said on the call. “More importantly, it’s marketed. It builds a brand so when it does go to a streaming service there’s a view that [the movie] has a higher quality that benefits the streaming service.”

The CEO said, “each and every decision” would be made through “the lens of analyzing asset value,” as the new company looks to cut $3 billion in synergistic cost savings, which includes layoffs.

Indeed, one of the first fiscal casualties was the shuttering of the CNN+ streaming service just weeks after its launch, including investment of more than $300 million. CFO Gunnar Wiedenfels said the decision was “exhibit A” in restructuring, adding that “2022 [would] undoubtedly be a messy year.”

CNN+ Subscription Streaming Service to Shut Down After Just One Month of Operation

CNN’s late-to-the-party branded subscription streaming VOD platform, CNN+, is set to shut down April 30, just weeks after launching. The service, which bowed shortly before the completion of the deal that created the new Warner Bros. Discovery media company (formerly WarnerMedia), reportedly suffered from low subscriber growth and internal conflicts about its role in the company, which is banking on the global rollout of HBO Max and Discovery+.

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“As we become Warner Bros. Discovery, CNN will be strongest as part of WBD’s streaming strategy which envisions news as an important part of a compelling broader offering along with sports, entertainment, and nonfiction content,” Chris Licht, Chairman and CEO of CNN Worldwide, said in a statement. “We have therefore made the decision to cease operations of CNN+ and focus our investment on CNN’s core news-gathering operations and in further building CNN Digital.”

According to data from Sensor Tower, the CNN app gained just 18,000 installs March 29, the day CNN+ launched, and about 9,000 installs daily in the week after. CNN+ usage was estimated to be fewer than 10,000 viewers per day according to some reports. The CNN cable network averages just over 750,000 viewers a day.

Media reports say about $300 million was spent on CNN+, with a content budget expected to approach $1 billion over the next few years. Many of the platform’s original programs will be distributed across other digital channels within the company.

 

HBO and HBO Max Added 3 Million Subscribers in the First Quarter

HBO and HBO Max continue to grow market share and combined subscriber bases globally. Majority parent AT&T April 21 reported that the pay-TV platform and branded subscription streaming video service ended the first quarter (ended March 31) with 76.8 million subscribers worldwide. That’s up 3 million subs from the end of 2021.

By comparison, Netflix, despite shedding 200,000 net subs, ended Q1 with more than 221 million subs.

The numbers exclude free trials, basic and Cinemax subscribers. Domestic Max/HBO subs also consist of U.S. accounts with access to Max (including wholesale subs and members receiving access through bundled services with affiliates that may not have signed in) and HBO accounts.

Both Max and HBO are minority owned and majority operated by Discovery as part of the new Warner Bros. Discovery media company (formerly WarnerMedia) after the $43 billion asset sale by AT&T to Discovery.

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Global Max and HBO subscribers increased 12.8 million from 64 million subs at the end of 2020. AT&T said the growth was primarily driven by international as well as domestic retail subscriber gains, which it claimed reflected the strength of the programming slate.

At the end of the quarter, there were 48.6 million domestic Max and HBO subs versus 44.2 million in the year-ago quarter, up 4.4 million subs from the previous year period.

“AT&T has entered a new era, meeting this opportunistic moment from a position of flexibility and strength thanks to our evolving networks, enhanced customer experience, growing 5G and fiber customer base and a much stronger balance sheet,” AT&T CEO John Stankey said in a statement.

Warner Bros. Discovery Media Company Officially Opens for Business

The new Warner Bros. Discovery media giant April 11 officially began as a publicly traded company when the market opened, with the stock trading at $24 per share with a market capitalization of more than $12.4 billion. Some analysts have a stock valuation target at $40 per share.

The $43 billion merger between Discovery and AT&T’s WarnerMedia business unit closed April 8 with Discovery CEO David Zaslav assuming the CEO position at Warner Bros. Discovery, which includes Warner Bros., HBO, HBO Max and Turner (TBS, TruTV, TNT, CNN), discovery+, HGTV, Magnolia Network and Animal Planet, among other properties.

“I am confident that our collective energy and genuine love for these businesses and brands will build the world’s most dynamic media and entertainment company,” Zaslav wrote in an April 8 company memo.

WarnerMedia CEO Jason Kilar, Warner Bros. CEO Ann Sarnoff and HBO Max boss Andy Forssell all exited the company last week.

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Zaslav reportedly is making the rounds across the company nationwide this week with stops planned in New York, Atlanta and Los Angeles — and a message how he intends to trim $3 billion in synergistic cost savings.

On Wall Street, analysts remain upbeat about the fiscal prospects for Warner Bros. Discovery, with Geetha Ranganathan, senior media analyst at Bloomberg Intelligence, contending the HBO Max subscription streaming service is now among the top four SVOD platforms on the market.

“At the end of the day, the HBO Max/Discovery product is going to be in the top four streamers, along with Disney, Netflix, and Amazon Prime Video,” Ranganathan told Yahoo! Finance. At the same time, some observers worry whether the new media company can turn a near-term profit, including generating free cash.

Indeed, HBO Max, which ended 2021 with more than 73 million combined HBO subscribers, is expected to generate a $1.5 billion pre-tax loss this year.

“[Max] is at the very beginning of its growth curve,” Jessica Reif, research analyst at Bank of America, told Yahoo.

Jason Kilar Exits CEO Position at WarnerMedia

Ahead of the official completion of Discovery’s acquisition of WarnerMedia from AT&T and launch of Warner Bros. Discovery on April 11, CEO Jason Kilar has announced his departure — about two years after joining the company. The former Hulu CEO made the announcement April 5 in a memo to WarnerMedia staff. Discovery CEO David Zaslav is expected assume operational control of the new company.

“With the pending transaction with Discovery nearing close, now is the right time to share with each of you that I will be departing this amazing company,” Kilar wrote.

A true believer in digital distribution across alternative channels, Kilar, as CEO of WarnerMedia, streamlined company operations, most notably at Warner Bros., and pushed forward with the controversial decision to release Warner’s entire 2021 theatrical slate concurrently on HBO Max — a strategy that began with Wonder Woman 1984 on Dec. 25, 2020.

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While the strategy jumpstarted HBO Max subscriptions and initially appeared not to negatively impact pandemic-era box office revenue, as 2021 rolled on and theaters expanded seating capacity, Warner titles suffered selling tickets.

The decision — driven by shuttered theaters during the pandemic — upended Hollywood’s traditional theatrical window distribution, catching many studio executives and producers — whose compensation was based on theatrical — off guard. Kilar later apologized for not better communicating the strategy to all parties involved.

In his staff memo, Kilar conveyed his love for “this team, this company, and this mission” at WarnerMedia.

“I’ve never been more fulfilled professionally. I’ve never been happier professionally. This team — and what we’ve built together — are the reasons for that.”

Kilar told the staff it had help elevate technology, product, and design to the highest levels at WarnerMedia.

“It has been deeply gratifying to lean into the future alongside each of you and to do so with conviction,” he wrote. “Leading this team has been the honor of my lifetime. My heart is so full, and I am beyond thankful to each of you. There is no better team on the planet, and I will savor every last step as I wander the lot in Burbank several more times this week, with this team on my mind, always.”

AT&T Names Accountant Samuel Di Piazza Chairman of Warner Bros. Discovery

AT&T may have sold away operational control of the pending Warner Bros. Discovery media company, but it still retains majority ownership of the erstwhile WarnerMedia unit. As a result, the telecom March 16 named the seven board members, including chairman, who will represent the company on the new 13-member board upon U.S. regulatory approval of the $43 billion transaction.

Samuel Di Piazza

Discovery, which has operational control of Warner Bros. Discovery via CEO David Zaslav, will appoint the other six board members.

The seven board members include three AT&T directors who will resign their seats when the merger is completed. They include Samuel Di Piazza, former executive at PricewaterhouseCoopers, who will be chairman of Warner Bros. Discovery; Debra Lee, former chair and CEO of BET Networks; and Geoffrey Yang, founding partner and managing director of Redpoint Ventures.

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Joining them are Li Haslett Chen (founder/CEO of Narrativ); Richard Fisher (former president of the Federal Reserve Bank of Dallas); Fazal Merchant (senior adviser to Sixth Street Partners); and Paul Price (most recently chief financial officer of Macy’s).

“These respected leaders bring a wealth of experience in finance, technology, media and entertainment, international trade, venture capital, and digital and direct-to-consumer platforms that is vitally important to the future of Warner Bros. Discovery,” AT&T CEO John Stankey said in a statement.

Discovery CFO: Streaming Services HBO Max, Discovery+ Will Be Combined

Subscription streaming video platforms HBO Max and Discovery+ will be combined following the official consummation of Discovery’s $43 billion minority stake, majority control deal for WarnerMedia with current parent AT&T, Discovery CFO Gunnar Wiedenfels told an investor group.

Speaking March 14 at the Deutsche Bank 30th Annual Media, Internet & Telecom Conference, Wiedenfels appeared to answer the long-running question about how Discovery would accommodate the two streaming services under the new Warner Bros. Discovery media company moniker.

Discovery CFO Gunnar Wiedenfels

With the merger set to be completed in the second quarter of this year, Wiedenfels said the goal was to meld the two platforms with a combined paid subscriber base of around 100 million into one service. In the meantime, the services would likely be bundled as management figures out the best way to make the combination happen.

“One of the most important items here is that we believe in a combined product as opposed to a bundle,” Wiedenfels said. “The question is, in order to get to that point and do it in a way that’s actually a great user experience for our subscribers, that’s going to take some time. Again, that’s nothing that’s going to happen in weeks — hopefully not in years, but in several months — and we will start working on an interim solution in the meantime.”

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Wiedenfels, who will transition to CFO of the new company, joins Discovery CEO David Zaslav, who will oversee Warner Bros. Discovery operations. Current WarnerMedia CEO Jason Kilar is expected to transition out of the company.

Wiedenfels contends Discovery+, which costs $4.99 per month with ads, $6.99 without ads, and HBO Max, which cost $9.99 with ads, $14.99 without ads, would initially offer a single sign-in for subscribers with each service offering select content on the other’s platform. He did not disclose any new pricing for the combined services.

“In order to get to that point and do it in a way that’s actually a great user experience for our subscribers, that’s going to take some time,” Wiedenfels said. “Building one very, very strong combined direct-to-consumer product and platform, that’s going to take a while.”