HBO Max Price Increase in 2023 Is an ‘Opportunity’ for Warner Bros. Discovery, Streaming Chief Says

The price of HBO Max could be going up soon — even as Warner Bros. Discovery accelerates plans to smush HBO Max and Discovery+ together next year.

HBO Max has not raised the $14.99/month price on its ad-free tier since the May 2020 launch, JB Perrette, president and CEO of global streaming and games at Warner Bros. Discovery, noted on the company’s Q3 earnings call. By 2023, he said, “it will have been three years since pricing has moved, which we think is an opportunity, particularly in this environment.”

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“We believe there’s actually some pricing advantage for us on the ad-free [HBO Max] service and we can probably move north of where the prices are today,” Perrette said.

At the same time, Warner Bros. Discovery has moved up its planned U.S. launch of the combined HBO Max-Discovery+ platform to spring 2023, a quarter ahead of what it was aiming for previously, CEO David Zaslav said on the call.

In addition, Zaslav said, WBD will be “aggressively attacking” the low end of the streaming market with its own free, ad-supported streaming TV (FAST) offering to launch sometime in 2023. Previously, he had said Warner Bros. Discovery was “exploring” a foray into FAST. “As a company with the largest film and TV library in the industry, we have a unique opportunity to increase our addressable market and drive real value, and we plan to move quickly,” Zaslav averred.

Company execs haven’t discussed what the pricing (or name) of the HBO Max-Discovery+ combo will be. Perette commented that pricing is one the key things “that makes us particularly optimistic about the products coming together,” in addition to “broader positioning that allows us to move from a product that may have a slightly more tailored approach to a fewer number of people in a household to a product that actually appeals to everybody in a household.”

SEE ALSO: David Zaslav Open to a Deal With J.K. Rowling on More ‘Harry Potter’ Content

WBD may also increase prices internationally on its direct-to-streaming services, Perrette said. “When we look internationally, our wholesale and retail ARPUs [average revenue per customer] are meaningfully lower than the market leaders. And for us that spells opportunity and an ability as we think about the new [HBO Max-Discovery+] product coming to market and even some initiatives before the new product comes to market for growth on ARPU internationally.”

In the third quarter, Warner Bros. Discovery, which is not reporting HBO/HBO Max sub numbers discretely after closing the WarnerMedia acquisition, saw its direct-to-consumer rolls inch up 2.8 million worldwide across HBO, HBO Max, Discovery+ and smaller DTC streamers. In the U.S. and Canada, the company added just 500,000 subscribers. The direct-to-consumer unit’s EBITDA loss doubled year over year, from $309 million in Q3 2021 (on a pro-forma basis) to $634 million in the most recent quarter.

Zaslav appeared to blame the sluggish Q3 growth in part on “deficiencies” of the existing streaming platforms. “The fact that we were able to grow almost 3 million subs outside the U.S. without a lot of promotion and with a platform that’s not that great, we really think is encouraging as we begin to look at rolling out more broadly,” he said.

Zaslav cited two examples where Warner Bros. Discovery’s streaming team is working to improve the services ahead of their integration. First, HBO Max has started to roll out an end card after someone has finished watching a series that recommends other programs, “an obvious way to drive greater consumer engagement,” he said. Second, WBD has begun experimenting with bringing Discovery+ content onto HBO Max. starting with select Magnolia Network shows such as “Fixer Upper: The Castle,” which he said was a top-five show on HBO Max after only a few days on the service. “These early green shoots bolster our strategic thesis that the two content offerings work well together and when combined should drive greater engagement, lower churn and higher customer lifetime value,” Zaslav commented.

Touching on the planned FAST launch next year, Zaslav said that WBD’s library has “a huge amount of content” that’s not on HBO Max and isn’t being monetized while it is almost all fully amortized. “[T]here’s always a huge number of people that do not want to pay. And we’ll be able to have them spending time with us, we think with an economic model that’s much advantage versus our peers. And then as we learn more, we can move the content through that ecosystem,” he said.

Meanwhile, according to Perrette, WBD has been “a little surprised” that not more subscribers have moved to the HBO Max With Ads plan ($9.99/month in the U.S.). He said that gives the company confidence that it can hike the price of the no-advertising tier and that it can increase the ad load on the ad-supported plan. Today, HBO Max With Ads runs 2-3 three minutes of ads per hour, about half of Discovery+’s ad load. That means Warner Bros. Discovery will have “almost 100% growth in the inventory available to us as we look to combine the ad loads of those two products,” he said.

Warner Bros. Discovery reported Q3 revenue of $9.82 billion, down 8% year-over-year, and a net loss of $2.3 billion, which included $1.92 billion of amortization from acquisition-related intangible assets and $1.52 billion million in restructuring charges including content impairments and write-offs.

The restructuring charges for Q3 included content impairments of $891 million, organization restructuring costs of $238 million, other content development costs and write-offs of $377 million, and contract-terminations costs of $15 million.

On the call Thursday, Zaslav again defended the content write-offs. “We didn’t take one show off a platform that was going to help us in any way,” he said. Warner Bros. Discovery, he continued, can “now invest in with the knowledge of what is working and replace those shows with content that has a chance to be more successful… We’re focused now on how do we deploy that capital in a way to generate real value and get the content that’s not working off.”

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