Warner Bros. Discovery eyes live sports streaming play for Max

Warner Bros. Discovery plans to lean into live sports streaming, including potentially on its Max SVOD service, executives indicated during the company’s second quarter earnings call Thursday.

In late May WBD launched its flagship Max platform that merged content from Discovery+ alongside enhanced product features on the former HBO Max app. While the first focus was a smooth rollout and transition of subscribers, WBD CEO David Zaslav hinted that live offerings such as news and sports could be coming down the pipe.

“Importantly, the [Max] platform now has full capability to deliver live programming. We’ll have more to say about that soon,” Zaslav said in prepared remarks during Thursday’s call for investors.

And while still early on in terms of the Max platform, he categorized news and sports as key differentiators and emphasized the draw of live TV for SVODs.

“News and sports are important, they’re differentiators, they’re compelling and they make these platforms come alive,” he commented. “And if you’re on an SVOD platform and something is going on in the world, and you could see it… it makes that platform really alive.”

While light on details on how or when live sports could be incorporated into a streaming offer (saying “you will hear from us on that”), the CEO said WBD believes “there’s significant opportunity in the streaming space for sports, and we look forward to leaning into this avenue.”    

Asked by investment analysts if sports assets could be folded into Max or promoted as a separate offering bundled with the SVOD, Zaslav didn’t commit to a strategy for the U.S. but described using differing tactics in other markets. He also noted that one elements of its sports deals are digital rights that mean it can put that content on WBD platforms at no incremental cost.

He did highlight prior experience in international markets, in some cases where WBD has offered sports as an incremental tier, and other times putting it on the entire platform.

“We have significant digital [sports] rights in the U.S. that we’re not currently deploying but plan to in the future, and that has a real chance to create meaningful strategic value,” said Zaslav during opening remarks. “We’ve had some good success in Europe and Latin America with layering sports into streaming with various business models, and this experience is informing our view on how to best deploy these sports rights here in the U.S.”

The executive gave a recent example of how WBD approached sports streaming in the U.K. through a joint venture with BT Sports.  There BT Sports merged with WBD’s Eurosport to create TNT Sports, which is now available on both linear and streaming and bundled with Discovery+ in the market.

Q2 results

WBD lost 1.8 million streaming subscribers in Q2 compared to the previous quarter, bringing its global total across Max, HBO Max, and Discovery+ to 97.6 million.  That includes losing 1.3 million subscribers domestically in the U.S. and Canada in a period that saw the launch of Max.

WBD now has 54 million domestic DTC subs and 41.8 million international subscribers.

During the earnings call, WBD CFO Gunnar Wiedenfels said losses reflect some overlap of Discovery+ and Max subscribers, along with churn anticipated after popular series such as “The Last of Us” and “Succession” came to an end. For the overlapping Discovery+/Max bases the finance chief cited “several 100,000” subs churning in the quarter, but noted that was meaningfully less than the company had expected.

Zaslav reiterated that despite some subscriber disruption, the company saw lower churn than expected throughout the process of migrating users to the new Max platform, with the “overwhelming majority” of subscribers in the U.S. successfully transferred.

He also cited “early and encouraging signs of stronger engagement,” the key metric two months after launch, with consumers both watching longer and engaging with new genres that joined alongside Discovery+ content. More than 20% of viewership is going to diverse content and at different time periods, Zaslav added.

While WBD posted positive streaming EBITDA for the first time in Q1, the second quarter saw a reversal, marking a narrow EBITDA loss of $3 million. The company had previously guided for Q2 streaming losses alongside costs associated with the Max launch, and the loss reflects a $555 million improvement over Q2 2022 on a combined basis. Warner Bros. Discovery it still expects the streaming business to achieve profitability for the full year 2023.

Direct-to-consumer revenues totaled $2.7 billion, up 23% on an actual basis or 14% on a constant currency and combined company basis. That includes a 25% increase year over year bump in streaming advertising revenue, which reached $121 million. Costs in the DTC segment totaled $1.95 billion.

Although WBD just had a blockbuster hit in “Barbie” (which is on track to reach $1 billion at the box office), its studio business dragged on results, with revenue down 24% year over year to $2.6 billion. WBD’s linear networks business also saw revenue dip, declining 5% from a year prior to $5.75 billion.

Total Q2 revenue decreased 4% to $10.35 billion. Still, Adjusted EBITDA increased 23% to $2.1 billion. WBD also repaid $1.6 billion of debt in Q2 and saw free cash flow increase to $1.7 billion – with similar expectations for free cash flow in Q3.