BT Sport/Eurosport UK merger - Digital TV Europe: The BT Sport-Eurosport merger gives glimpse of wider Warner Bros. Discovery strategy

Story from Digital TV Europe:

In relatively swift fashion from the reveal of exclusive talks in February and a deal announced in May, Warner Bros. Discovery and BT Group have completed the merger of BT Sport and Eurosport into a combined 50:50 joint venture.

The new entity will have a huge rights portfolio including UEFA Champions League, UEFA Europa League, the Premier League, Premiership Rugby, UFC, the Olympic Games, tennis Grand Slams featuring the Australian Open and Roland-Garros, cycling Grand Tours including the Tour de France and Giro d’Italia and the winter sports World Cup season.

In a press release, the companies said that BT Sport and Eurosport will “retain their separate product propositions for a period of time”, with the intention to “launch a new sports brand in the market and present this combined sports offering together with an entertainment offering from Warner Bros. Discovery.”

This is the aspect of the tie-up which I find the most intriguing, and sheds some light on the long-term strategy of Warner Bros. Discovery at a time when it has been painted as a stereotypically cold corporation and CEO David Zaslav as a Dickensian villain taking away a child’s favourite toy.

Brutal cost-cutting:

From a user perspective it is hard to argue that Warner Bros. Discovery’s recent moves have been anything short of anti-consumer.

The company sent social media into a meltdown when it decided that the eagerly awaited US$90 million Batgirl film would serve it better as a tax write-off than as a feature film in cinemas or on streaming. This was a decision which was only conveyed to the filmmakers Adil El Arbi and Bilall Fallah at the last minute. One of the creators even told Skript that they tried to record the film on their phone from but it had already been deleted from the servers – and presumably lost forever.

While some stories tried to attribute the cancellation to poor test screenings of the almost-completed feature, El Arbi explained: “The guys from Warner told us it was not a talent problem from our part or the actress, or even the quality of the movie. They told us it was a strategic change. There was new management, and they wanted to save some money.”

In fact, the only people seemingly happy with Warner Bros. Discovery’s direction of late are cinema operators, with Zaslav steering the company’s focus back to theatres – even if there will evidently be fewer films released. (One title that bafflingly hasn’t been cancelled is The Flash, a film Zaslav is reportedly fond of despite its star Ezra Miller being charged with felony burglary and facing accusations of housing children on a farm with guns and marijuana.)

Warner Bros. Discovery has also pulled dozens of films and series from HBO Max – including 200 episodes of Sesame Street and original movies made for the streamer – for similar tax purposes, and shut down premium news streamer CNN+ less than a month after it launched.

The biggest irony of all is that, since the merger closed in April, Warner Bros. Discovery has been taking these drastic cost-cutting measures in an effort to find US$3 billion in savings – but the unpopularity of the strategy has wiped US$20 billion off of its market cap.

At this point, some have argued, Warner Bros. Discovery’s situation is torn between “the fumblings of an egoist with no grasp on the properties he’s purchased,” and an executive that “​​just doesn’t care about the stuff a lot of us care about.”

Streaming strategy:

Ultimately, a CEO’s job under the current arrangement of the market economy is to turn as little investment as possible into the maximum reward, and this is something which Discovery has made its bread and butter.

The company’s Shark Week event may be little more than a meme at this point, but it demonstrates Discovery’s ability to take content which costs very little to produce and maximise the levels of profit. Other IP littering discovery+ like Ghost Adventures and 90 Day Fiancé further demonstrates the company’s reliance on this approach.

The fact that this strategy stands in polar opposition to HBO’s brand of carefully curated big-budget shows and movies is what has largely ruffled feathers, but from a purely financial perspective it makes sense for a heavily indebted media company.

Looking ahead, the major focus of Warner Bros. Discovery is the restructuring of its DTC business. This started with the halted HBO Max rollout and subsequent confirmation that a combined streamer will launch in summer 2023. This is another area of frustration, with HBO Max regularly cited by pundits and critics as the best pound-for-pound streaming service in the US – they’re angry that Warner Bros. Discovery is apparently ruining a good thing to saturate the streamer with low-quality reality programming.

Warner Bros. Discovery is aiming for a target of 130 million global DTC subscribers by 2025, which would need them to add around 40 million new subs to its current total of 92.1 million across the current HBO, HBO Max and Discovery+ offering.

Sports go sports:

And this is where we circle back to this week’s news in regards to BT Sport and Eurosport.

As we saw with the 2020 Olympics, discovery+ has made sports a core part of its offer (along with the aforementioned ghosts and sharks) and has effectively made the Eurosport Player redundant as a standalone service.

This looks like a model which Warner Bros. Discovery will emulate on a greater scale in the coming years – and potentially focuses on Europe more than the US. HBO’s content is tied up in a distribution deal with Sky in the UK, Italy and Germany until 2025, but after that point the shackles are off. After all, the company did explicitly say that the new sports brand would be offered “together with an entertainment offering from Warner Bros. Discovery.”

A streaming proposition housing everything from Game of Thrones and The Sopranos to the Champions League, Premier League and Olympics (and yes, sharks) would instantly make it the most complete SVOD offering in the UK – and it wouldn’t even be close. The only comparable service in terms of breadth of content is Prime Video, though its sports rights look cute by comparison to the combined strength of BT and Eurosport.

This is of course contingent on a willingness to spend and an approach to content that doesn’t just rely on turning things around cheaply. Will the miserly CEO be willing to enter into a renewed bidding war for the English Premier League rights come 2027 when the likes of Amazon and DAZN will be looking to make a statement?

Similarly, will HBO continue to produce its risky, boundary-pushing content? Or will the abandonment of diversity in an effort to court middle America turn it into another staid factory for marketable IP? With this in mind, is it any surprise that the high-profile film thrown in the bin happened to star a woman of colour and prominently feature a trans character?

The company’s presentation of ‘fandoms are for boys, genredoms are for girls’ during a recent earnings call was widely panned and provided the cartoon villain CEO with an extra negative character trait.

Warner Bros. Discovery has the resources and library to be on a par with the likes of Disney and Netflix in streaming, but as we stand in 2022 the company’s reputation is currently in the mud – both on Wall Street and with consumers. However, David Zaslav and co. ultimately won’t mind so long as they manage to become a profitable international media empire – and that’s showbiz.

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