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HBO and Warner Bros. Discovery to unveil new Max streaming service

Two years ago, the media mogul David Zaslav said he had a plan to compete with the streaming titans Netflix and Disney: Combine the scripted entertainment of HBO Max with Discovery’s library of reality and unscripted series. The goal, he said in 2021, was to be “one of the top streaming companies in the world.”

He is about to put that idea to the test.

On Wednesday, Warner Bros. Discovery executives will unveil plans for the new combined streaming service, bringing together classic HBO series like “The Sopranos” and “Succession” with Discovery series like “Dr. Pimple Popper” and “Fixer Upper.” The service will be called Max and debut in the next month or two, according to three people with knowledge of the decision.

The streaming service will cost roughly $16 a month — the price of HBO Max now — though there will be several price tiers, including a less expensive one with advertising, the people said.

Success of the new service is crucial for Warner Bros. Discovery, which Mr. Zaslav formed last April with the blockbuster merger of WarnerMedia and Discovery. He sold shareholders on the deal in part by arguing that the combined company could have a killer app.

The company has had a rough opening 12 months, shelving projects and laying off thousands. Many of the moves were part of an effort to help pay down an enormous debt load of about $50 billion.

The importance of the new streaming service is not lost on top executives. Gunnar Wiedenfels, the chief financial officer for Warner Bros. Discovery, said at an investor conference last month that the service was “one of our big, big priorities for this year.”

“It’s an absolutely critical milestone,” he continued.

Executives at Warner Bros. Discovery, like those at other major entertainment companies, know full well that streaming entertainment is the future. But most companies are losing hundreds of millions on streaming services just as revenue from traditional cable TV is falling, leaving them in a bit of a bind. Warner Bros. Discovery owns more than a dozen cable networks.

For years, entertainment executives aimed to dazzle Wall Street by trumpeting streaming subscriber counts. After Netflix’s surprising subscriber decline in the first quarter of last year, though, media executives and Wall Street began raising urgent questions about whether streaming services had started to hit a ceiling on subscribers in the United States. Profitability became a much greater focus.

Warner Bros. Discovery still has a subscriber goal for its streaming division — 130 million by 2025, up from the 96.1 million now — that would vastly trail Netflix’s current total of 231 million and Disney’s 235 million subscribers across Disney+, ESPN+ and Hulu. But executives now believe that the service’s profitability is the most vital benchmark.

The company is projecting that the streaming division will break even by next year and be profitable in two years. In the company’s most recent quarterly earnings, streaming lost $217 million, cutting losses significantly from a few months ago, and was regarded as a win by some analysts.

Because of the focus on profitability — and the fact that the streaming service is a combination of Warner Bros. Discovery’s existing services, not an entirely new one — the Wednesday announcement will hardly look like the splashy streaming dog and pony shows that media companies staged just a few years ago.

When Disney held an event to announce Disney+ in April 2019, it did so over three and a half hours in an extravagant showcase for investors. Likewise, Apple staged a star-studded event that previewed Apple TV+ at its campus in Cupertino, Calif., in March 2019, flying in dozens of boldface names like Oprah Winfrey, Steven Spielberg and Jennifer Aniston.

By contrast, Warner Bros. Discovery’s event will be just over an hour and feature no stars, said the people with knowledge of the company’s plans. Instead, the event will unveil the new service’s name, marketing plans and technological upgrades, as well as some TV series and movie announcements.

It is not yet clear how existing subscribers will migrate from HBO Max to the new service once it’s available. That is one of the topics that executives are expected to address on Wednesday. Discovery+ will remain a stand-alone app.

Some analysts question whether combining Discovery’s library of programming with the scripted shows available on HBO Max will put the new combined app over the top. Julia Alexander, the director of strategy at the research firm Parrot Analytics, said she was “skeptical that it will drive the level of subscriber acquisition that some on Wall Street are looking for.”

But, she argued, it will help with time spent on the app, pointing to data that many subscribers use streaming services for ambient television experiences — the kind of watch-it-while-you-fold-the-laundry fare that is Discovery’s bread and butter with brands like HGTV and the Food Network.

“You’re opening HBO Max once a week and might not open it up for the rest of the week,” she said. “They want you to open it two, three or four times a week. Unscripted programming creates that increased engagement.”

Indeed, even though HBO has been on a delirious hot streak — one hit after the next going back to August, including “The House of the Dragon,” “The White Lotus,” “The Last of Us” and, now, “Succession” — the amount of time spent on the app in the United States is toiling in the lower-middle ranks of the top streaming services.

According to Nielsen, 1.3 percent of the total minutes spent by Americans using television was with HBO Max in February, a fraction of what YouTube (7.9 percent), Netflix (7.3 percent), Hulu (3.3 percent) and Amazon Prime (3 percent) garnered. HBO Max instead finds itself in the same neighborhood as Comcast’s Peacock and the Fox Corporation’s free advertising-supported streaming service, Tubi.

If there is more time spent on the new service, Ms. Alexander said, that could help prevent subscribers from canceling the service when the company inevitably raises the price. And it could increase revenue from advertisers on the streaming service’s lower-priced tier.

And removing HBO from the streaming service’s name also signals an ambition to attract more subscribers.

“Dropping HBO from the name is cementing that ‘we’re not just a home for premium programming,’” Ms. Alexander said. “‘We’re the home for anything you want to watch.’” New York Times

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