Discovery Inc-WarnerMedia merger - Deadline: Streaming Combo Of HBO Max And Discovery+ Will “Take A While,” CFO Affirms

Story from Deadline: 

Eventually, HBO Max and Discovery+ will come together as a single streaming offering, but the integration will “take a while,” CFO Gunnar Wiedenfels said at an investor conference Monday. 

With the $43 billion merger of Discovery and WarnerMedia in the “ninth inning” ahead of an expected April close, the exec continued, the near-term focus is on providing a bundle of the two discrete services. He delivered the comments at Deutsche Bank’s 30th annual Media, Internet & Telecom Conference.

Down the line, “the main thrust is going to be harmonizing the technology platforms,” Wiedenfels said, “building one very strong combined direct-to-consumer product and platform, and that’s going to take a while.”

The consensus in industry and Wall Street circles has been that a single offering makes the most sense as Warner Bros. Discovery attempts to compete head to head with Disney, Netflix and others.

Discovery CEO David Zaslav has frequently talked about the likelihood of the two services eventually merging, and that scenario was a key driver of the merger when it was proposed last May. Discovery+, which launched in the U.S. in January 2021, accounts for most of the company’s 22 million global streaming subscribers — a respectable tally, but not the Netflix rival the company initially envisioned.

During the company’s fourth-quarter earnings call in February, Zaslav did not hedge when offering his outlook about a streaming combination. “We see that there’s also a different viewing pattern between what’s going on in HBO Max and with Discovery+,” he said. “A lot of our content is viewed throughout the day. So the first question is, how do we do when we come together?”

Given the pressure the merged company will face to achieve cost savings, putting the streaming services together will be a logical step in terms of the balance sheet as well as the consumer proposition. Discovery has estimated it will get $3 billion in savings from the deal.

“A lot of the cost saving is actually going to come out of cost avoidance,” said on the earnings call. “Right now we’re running two completely separate, direct-to-consumer technology stacks of marketing operations. We’re spending roughly $6 billion for technology and marketing between HBO Max and Discovery+. Clearly, once we have successfully migrated those technology stacks in Q1, there is going to be tremendous opportunity to reduce costs.” 

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