It does seem risky to combine both services. Existing prices with ads is $9.99 and $4.99. TOTAL: $14.98. Ad-free is $14.99 and $6.99. TOTAL: $21.98. The people that only subscribe to HBO Max, about 50 million people, might just not subscribe at all for example if they subscribe to ad free currently at $14.99 and that price is going to jump to around $21.98 per month because Discovery content is included which is not content they ever wanted. Same for people that only subscribe to Discovery+. They surely won't want to pay more for a service that has HBO if they never wanted HBO. I don't see how they will ever make the price of both services any cheaper than the combined cost right now. That would be a price reduction which is unheard of in today's world. By the time it rolls around in 2023 I can see them wanting $24.99 for the combined service.
Nah, they're smart enough to know that such a service (something that combines the entirety of the current HBO Max and Discovery+) -- without even any live sports or news -- would get very, very few takers at price points of $14.98 with ads and $21.98 ad-free. They still must compete against the significantly more popular Netflix and Disney+ Hulu, both at lower prices.
So if they can't jack up prices significantly, how do they make the combined service more profitable?
First, they shrink the combined content library by taking a lot of the older series and movies and monetizing that stuff separately. Some of it will get licensed out to competing services (e.g. Netflix, Prime Video) but a lot of it will get placed in a new WBD FAST (free ad-supported TV) app which they'll aggressively market. FAST is the biggest growth area in streaming these days and I don't see that changing as economically pinched consumers, especially younger ones to whom all that old content is "new," don't mind watching some ads in exchange for quality content that costs nothing.
Second, they'll lower the cost basis of the new content showcased in the combined service. Zaslav says they're going to "dramatically" increase spending on HBO content. IDK, maybe that's true. But it's also true that HBO won't get theatrical movies as soon, only after they've wrung out every penny possible at the box office, and then on VOD, and then on disc. And we're also not going to see any more straight-to-streaming movies either. I also expect that there will be even less cannibalization of the basic cable nets' current content than we've seen so far (and HBO Max has been much less cannibalistic than Hulu or Peacock). Zas
thinks this will help prop up his cable sub numbers but I don't think it will, as cable is a lost cause at this point and the cord-cutting trend just relentlessly continues on.
So while HBO Max was conceived by Warner as their direct-to-consumer replacement for HBO plus their basic cable nets, i.e. their own little mini-bundle, Zas does not see it that way. He sees it much more as a place for relatively new content that is mostly supplemental to the basic cable bundle. Library content will largely shift elsewhere (to their FAST and/or competing SVODs and FASTs), while their basic cable nets focus on live sports, live news, and exclusive premier windows for various popular shows from Discovery personalities.
What I still don't have clarity on is whether the combined service always includes HBO or if it is instead an optional add-on. In the latter scenario, I could imagine the service marketed as "Discovery+ HBO" with the base Discovery+ tier costing maybe $5 with ads or $8 ad-free, and then always ad-free HBO costing an extra $8/mo more on top of that, for totals of $13 and $16.
But if HBO is a non-optional part of the service -- and there's really no reason to think it won't be, based on everything we're heard so far -- then I could see "HBO Discovery" costing $10 or $11 with ads in the non-HBO stuff or $16 for the whole thing ad-free.
