Warner Bros. Discovery launches first streaming push reset as DC sues Marvel

Aug 4 (Reuters) – Warner Bros. Discovery Inc on Thursday outlined a new strategy that will merge streaming service HBO Max with Discovery+ while pledging to target Marvel’s “Captain America” ​​and “Iron Man.”

The move, which confirms a Reuters report, will combine WarnerMedia’s dramas, comedies and movies with Discovery’s reality shows and comes as streaming services face slowing demand.

Under the new strategy, the company will assemble a team to create a 10-year plan for its DC comics-tie franchise that includes “Wonder Woman”, “Superman” and “Aquaman”.

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The approach was similar in structure to Walt Disney Co’s (DIS.N) approach to the Marvel Cinematic Universe, chief executive David Zaslav said.

In the first conference call after launching a comprehensive review of WarnerMedia’s assets following the $43 billion merger with Discovery, executives explained how they plan to reset the company that once prioritized investments in video streaming in an approach that will seek a diverse approach.

“We have all the platforms in the ecosystem, and in a world where things are changing and there’s a lot of uncertainty…it’s a lot more stable and a lot better than having a cash register,” said said Zaslav during a conference call with analysts. .

The new plan also explores the possibility of free ad-supported streaming services.

Investors were still unconvinced as shares fell 11% after the company cut its core earnings forecast.

“Launching a new ad-supported plan could be an effective move as long as pricing and offerings are well calibrated. This strategy is in line with what competitors like Disney and Netflix are doing,” said analyst Paul Verna. Principal at Insider Intelligence. .

Executives said the review revealed previously approved investments and strategies that would harm 2022 earnings before interest, taxes, depreciation and amortization (EBITDA) by $2 billion. making its roster of theaters available directly on the subscription streaming service and an expensive investment in CNN+.

“I agree with their attitude that streaming is just one piece of content monetization, but there is still a bigger albatross of streaming investment, especially in 2022, than we realize. might have expected,” said Benchmark analyst Matthew Harrigan.

Warner Bros. Discovery expects adjusted EBITDA to be between $9 billion and $9.5 billion for 2022, down from its previous estimate of $10 billion set before the merger closed. It projects 2023 base earnings to be $12 billion.

The company, which released combined results for the first time, also disclosed 92.1 million streaming subscribers at the end of the second quarter.

This reflects a gain of approximately 1.7 million from the prior quarter, but also a decline of approximately 300,000 subscribers in the United States and Canada and the elimination of 10 million subscribers due to certain unpaid customers. essentials and AT&T wireless subscribers who have never activated their HBO Max. service.

Prior to the merger, HBO and HBO Max had a combined 76.8 million subscribers, including 48.6 million in the United States. Discovery+ ended the first quarter with 24 million subscribers.

The newly merged company reported a net loss of $3.4 billion in the second quarter and a slight decline in revenue.

The net loss includes about $2 billion of amortization of intangible assets, about $1 billion of restructuring and other costs, and $983 million of transaction and integration expenses, the company said.

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Reporting by Dawn Chmielewski in Los Angeles and Chavi Mehta in Bengaluru; Editing by Kenneth Li and Sriraj Kalluvila

Our standards: The Thomson Reuters Trust Principles.

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