Too Much TV: Your TV Talking Points For Thursday, May 9th, 2024

Another perplexing move from Warner Bros. Discovery

Here's everything you need to know about the world of television for Thursday, May 9th, 2024:

HONESTLY, I JUST DON'T UNDERSTAND THIS APPROACH AT ALL
Desperation can make do funny things. It hastens your decision-making process, it forces you to jump into situations that you wouldn't normally consider. That's especially the case if you're running a publicly traded company. You need to keep investors happy to keep your job. But the needs of the investors and those of the customers can be two very different things. 

One example of that tension can be seen at Warner Bros. Discovery, which continues to struggle despite having some of the best assets in the entertainment business. 

I wrote yesterday about my doubts about how effective the Disney+/Hulu/Max soft bundle might be when it comes to lessening subscriber churn and customer acquisition costs. But at least I thought I understood the parameters of the proposal. And after reading some comments this morning from WBD CEO David Zaslav and CEO and president of global streaming and games JB Perette, I'm more confused than ever.

Speaking on the company's Q1 call on Thursday, he described a three-way bundle comprising Max, Disney+, and Hulu starting this summer in the U.S. as emblematic of a “restructuring of how people view content.” 

No, I have no idea what that means. And if the bundle is somehow reflective of the way people view content, then why limit the idea to the U.S.?

As Variety notes, even at a substantial discount, the new bundle is likely to be expensive:

Pricing of the Max-Hulu-Disney+ bundle hasn’t been announced. But it will be “priced very attractively for consumers,” Warner Bros. Discovery’s JB Perrette, CEO and president of global streaming and games, told analysts. As sold separately, the Disney+ and Hulu bundle (without ads) costs $19.99/month and the standard ad-free Max plan currently costs $15.99/month. So the bundle would be expected to be priced at some discount to the $36/month it costs to get them separately.

Now, I could be a jerk and remind people that Perrette is the same person who not much more than a year ago was telling investors that there was room for price increases with Max, because the company believed the service was underpriced compared to its overall value.

I could also be an even bigger jerk and ask where is that WBD FAST app the company promised when they began pulling content off of Max? Instead, WBD seems to be content to simply shovel old programs into themed FAST channels. Which is fine, although it's a much less ambitious approach.

Perrette said both Disney and WBD will be marketing the cross-company bundle within their respective “buy flows,” presented to consumers when they are signing up for any of the streaming packages. “You won’t be able to miss” the bundle offer, he said.

Perrette said the “synthetic” bundle of Disney+, Hulu, and Max for a single discounted price will let both companies increase the long-term value of subscribers they acquire and — ideally — reduce the rates at which they cancel service.

This is one of the big questions I have about the idea. WBD executives (and to be fair, executives at Disney) seem to believe that offering a discounted bundle price will lure both new subscribers and well as those who are currently subscribing to one or more services.

And yet, both companies have recent experiences that suggest that isn't necessarily the case. WBD had to scrap plans to roll Discovery+ subscribers into Max after discovering there were a lot of people just fine streaming mostly familiar unscripted programming.

And the Disney Bundle has had problems of its own. After initially bundling Hulu, Disney+, and ESPN+ into a discounted bundle with mixed results, the company has shifted into a plan that also allows subscribers to just bundle Hulu and Disney+

All of this means that while a discounted bundle can likely slow churn, a cheaper price isn't necessarily enough to convince people to pay more money for additional services that aren't all that interested in watching.

Which makes these comments especially confounding:

And, Perrette said, the bundling of cross-company streamers will allow for more efficiency in terms of content spending.

“I think what happened in the 2010s is the industry went down in a very dangerous financial path of trying to invest in every type of content in every genre to try and be something for everyone,” Perrette said. “And at the end of the day, we know where that led led us to. We’re now getting back to all being great at what we do and swim in the lanes that we were great at.”

Perrette continued, “Disney obviously is incomparable and world-leader in kids and family. We are world leaders in premium drama, scripted drama, comedy nonfiction verticals, and we can get back to investing in prioritizing our visions and our key content they can do theirs. And synthetically, these bundles allow us to do that while still providing the consumer with a very attractive price for the combination of products such that they feel like they don’t need to anymore do all the switching in and out of services month to month but rather pay and get an advantage of one price.”

With a bundle like Max-Hulu-Disney+, “even if they don’t use a service in one month, [consumers] still feel like they’re getting great value and they might use it the next month,” Perrette said. “And so it’s got a lot of rationale by pulling these together and makes us all be able to go back to investing in the areas that we really are great at.”

So...Max is just going to back even further away from family-friendly programming? And it's not as if Disney and/or Hulu are ONLY making family-friendly programming. Especially in Hulu's case, the service has arguably had some of its biggest success with scripted dramas. It also has access to a lot of nonfiction verticals, thanks to Disney's part-ownership of A&E Networks.

Perrette's comments don't much sense. What it really sounds like is that WBD is looking for an excuse to cut back even more on original content spend.

Even if he was correct, then what does that mean for the markets outside the U.S.? Those WBD platforms (mostly, but not exclusively Max or Discovery+) won't have this soft bundle deal to rely on for family-friendly programming and other genres Perrette doesn't believe the company can do well. And to be clear, WBD has already cut back substantially on its original content spending in most of its markets. 

I find this approach just incomprehensible. On the streaming front, Zaslav and Perrette have made massive cuts to their original content spending, licensed off a bunch of core titles, and transferred others to branded FAST channels. They've gone all in on the idea of live sports being the savior for their linear channels and now the best-case scenario is they'll end up paying a lot more for fewer games. They've cut spending at core linear networks such as Food and HGTV, opting to spend an increasingly larger percentage of the decreased budget on a few familiar stars.

And it's not as if any of these moves have paid off for the company. "Our streaming business is going to be in the black soon" doesn't help a lot if the primary way you're doing it is by slashing expenses and marketing. Someone from WBD reached out to me after yesterday's newsletter to mention that according to their understanding (although I have no way of confirming it), customer acquisition costs for Max in the U.S. have increased about 30% over the past year. Which is a dangerous trend for any company.

WBD executives can't even be accused of making ill-advised decisions to boost the stock price of the company. Because since the merger was completed in April 2022, the WBD stock price has dropped from nearly $25 to $8. 

So why are Zasalv and Perrette continuing to make moves that seem likely to make things even more difficult for the company in future years? Well, a cynic might note that the compensation for both executives is primarily tied to the WBD free cash flow. And that figure has climbed from $2.5 billion in the quarter when the merger was finalized to $6.2 billion in Q4 2023. 

In case you aren't familiar with the term, free cash flow (FCF) is essentially the money that is left over after a business pays its operating expenses (OpEx), such as mortgage or rent, payroll, property taxes, and inventory costs — and capital expenditures (CapEx). And if you are trying to boost free cash flow, one way is to slash overhead and spending enough that even if the company is struggling, its FCF increases. 

I'm not saying WBD executives are cynically making that decision. But I'm not saying I don't believe that might be a primary motivation.

TWEET OF THE DAY

ODDS AND SODS
* I had no idea there is a Hollywood Reporter-branded snack shop at LAX.

* Peacock has renewed Seth MacFarlane's Ted for a second season.

* Netflix released a trailer for the upcoming six-episode docuseries Hitler And The Nazis: Evil On Trial, which is directed by Joe Berlinger.

* No disrespect meant, but Andrea Mitchell and live television is not a great combination in 2024.

* ESPN has inked a media-rights deal with League One Volleyball for its debut season starting January 2025. The agreement covers 10 matches on the ESPN linear networks and an additional 18 matches on ESPN.

* Paramount+ has renewed the Zoe Saldana action series Special Ops: Lioness for a second season, but is shortening the name to Lioness.

* Freeform released a trailer for the upcoming reality series Royal Rules Of Ohio.

* Heartbreak High has been renewed for a third and final season at Netflix.

* Law & Order: Organized Crime is moving from NBC to Peacock for its upcoming fifth season.

* Sinclair, one of the largest owners of broadcast stations in the U.S., is looking to sell more than 30% of its footprint, according to CNBC. That translates to as many as 60 of the 185 TV stations its owns or operates. 

* The NASCAR news site Racer is reporting that NASCAR Race Hub, the one-hour daily program that airs on Fox Sports 1, will come to an end next month.

WHAT'S NEW TONIGHT AND TOMORROW

THURSDAY, MAY 9TH:
* Black Twitter: A People’s History (Hulu)
* Blood Of Zeus Season Two Premiere (Netflix)
* Bodkin Series Premiere (Netflix)
* Love Undercover Series Premiere (Peacock)
* Maxton Hall: The World Between Us Series Premiere (Prime Video)
* Mother Of The Bride (Netflix) - [first look video]
* Pretty Little Liars: Summer School Series Premiere (Max)
* Thank You, Next Series Premiere (Netflix)
* The Deadly Getaway (BET+)
* The GOAT Series Premiere (Prime Video)
* The Guardian Of The Monarchs (Netflix)
* The Manny (LMN)

FRIDAY, MAY 10TH:
* Blood Of Zeus Season Two Premiere (Netflix)
* Cooking Up Murder: Uncovering The Story Of César Román (Netflix)
* Doctor Who Season Premiere (Disney+)
* Empty Nest Refresh Series Premiere (The Roku Channel)
* Living With Leopards (Netflix) - [first look video]
* Past Lies Series Premiere (Hulu)
* Pokemon Horizons: The Series (Netflix)
* The Simpsons: May The 12th Be With You (Disney+)
* The Ultimatum: South Africa Series Premiere (Netflix)

SEE YOU ON FRIDAY!