Variety: Watch HBO Shows for Free? Warner Bros. Discovery Says It’s Exploring No-Cost, Ad-Supported Streaming Option

Story from Variety:

Warner Bros. Discovery is looking to pull a FAST one — telling investors the company is mulling the launch of a free, ad-supported TV (FAST) service stocked with content from its portfolio of brands to complement its premium subscription biz.

The first strategic priority on the streaming side of the house is to merge HBO Max and Discovery+ into a single platform. That’s slated to hit first in the U.S. in the summer of 2023, the company said Thursday, although Warner Bros. Discovery did not reveal what it would be called or what it would cost.

Warner Bros. Discovery chief David Zaslav, on the Q2 earnings call, said that once the integrated subscription VOD service is “firmly established in the market, we see real potential and are exploring the opportunity for a FAST, or free ad-supported streaming [TV], offering that would give consumers who do not want to pay a subscription fee access to great library content.” The potential FAST service also would act as an “entry point” to upsell consumers on the paid HBO Max-Discovery+ combo, he added.

It’s possible such a FAST service will include some HBO programming. But to be clear, you wouldn’t get anything like the full complement of HBO original series for free.

The content in Warner Bros. Discovery’s potential FAST service “would be totally different than the content that will be in our premium SVOD offering,” JB Perette, president and CEO of streaming and games for Warner Bros. Discovery, told analysts. “There is a lot of content that wouldn’t necessarily make sense in a premium product that might make sense” in a free, ad-supported streaming tier, he added, saying Warner Bros. Discovery has a library of more than 100,000 episodes across its combined portfolio.

Perette said Warner Bros. Discovery will provide more detail on its potential FAST plans at an investor day planned for the end of 2022.

In the U.S., players in the fast-growing FAST segment include Paramount’s Pluto TV, Fox’s Tubi, Amazon’s Freevee (formerly IMDb TV) and the Roku Channel.

Warner Bros. Discovery, formed through Discovery’s acquisition of WarnerMedia from AT&T, remains steeped in red ink on the streaming front as it continues to plow money into HBO Max and Discovery+.

In Q2, the streaming business’ top line growth slowed as losses mounted. Warner Bros. Discovery’s Direct-to-Consumer segment generated $2.41 billion in revenue for the period, up 2.5% year over year but down from $2.52 billion in Q1 on a pro-forma basis. The DTC business’ operating loss swelled to $1.53 billion in the most recent quarter (including a $472 million expense for “restructuring and other charges”), nearly double the pro-forma loss of $786 million in Q2 2021.

Overall, the company gained 1.7 million subscribers for HBO, HBO Max and Discovery+, to hit 92.1 million as of the end of June. But in the U.S. and Canada, it lost 300,000 subscribers sequentially across those services.

Perette said the company expects losses for the streaming segment to peak in 2022 “as we do the heavy lifting around technology, personnel and integration ahead of the planned relaunch starting next summer.”

In the U.S., Warner Bros. Discovery is aiming for the DTC segment to turn profitable in the U.S. in 2024. By 2025, Warner Bros. Discovery expects to have 130 million global streaming subscribers and that its direct-to-consumer businesses will generate $1 billion in earnings before interest, taxes, depreciation and amortization (EBITDA), Perette said.