With Disney+ Bundle, Max Is the First Streamer to Get Out of the 'Everything for Everyone' Game | Analysis

Disney CEO Bob Iger, WBD CEO David Zaslav, Netflix Logo

Warner Bros. Discovery has decided it can’t be all things to all of the consumers that touch its many film, television and streaming brands. So the company is partnering with rival Disney on a streaming bundle to combat the issue bedeviling Hollywood: subscriber churn.

“Churn is just the killer in this business,” Warner CEO David Zaslav said on the earnings call Thursday, when the media and entertainment giant reported yet another quarter dripping with red ink.

WBD missed most Wall Street estimates on Thursday. But analysts shrugged off the poor results, choosing instead to press executives for more clarity on the joint Disney+-Hulu-Max bundle that Disney and Warner announced Wednesday.

Zaslav and other WBD executives touted the new bundle, due to launch this summer, as a way for Hollywood studios — who aren’t Netflix — to “swim in the lanes” where they perform best. As Hollywood’s ongoing contraction puts pressure on the streamers and shows that exploded out of the streaming boom of the late 2010s, Warner Bros. Discovery sees the bundling as a strategic move to ensure Max survives whatever culling is on the horizon.

While WBD excels at premium drama, scripted drama and comedy, Disney is “incomparable and a world leader” in kids and family entertainment, said JB Perrette, WBD’s CEO and president of global streaming and games.

The idea isn’t altogether new. Max and Netflix did an ad-supported bundle together through Verizon. Zaslav then touted the “super bundle” concept because bundles tend to limit subscriber cancellations, as The Wrap reported. But Warner partnering with its longtime competitor Disney shows how traditional Hollywood studios are opening up the playbook to survive against Netflix, the only streamer currently turning a profit.

On Thursday, WBD, whose stock has been languishing after a series of money-losing quarters, said it suffered yet another net loss of nearly $1 billion on revenues of $9.96 billion, down 7%. Its film studio, with a dearth of big hits, saw Q1 profits plummet 70% in the quarter. But once again it was linear television, suffering through a tough ad climate and the effects of the protracted labor strikes, that was mostly to blame for the company’s overall lackluster performance.

Still, Warner Bros. Discovery did make progress with its streaming business, boosting profit by 72% in the quarter year over year to $86 million, on flat revenues, while adding 2 million subscribers for a total of 99.6 million globally.

“The current media landscape is increasingly dynamic,” Zaslav told analysts. “And in response we’ve had to make some tough and at times unpopular decisions. But we are doing what we believe is necessary to best position the company for the future.”

The kids and family question

JB Perrette, WBD CEO and President, Global Streaming and Interactive (Photo by Dimitrios Kambouris/Getty Images for Warner Bros. Discovery)

When HBO Max and Discovery+ combined to form Max last May, WBD executives touted the potential for the new streamer to appeal to kids and family, pointing to the HBO brand as being “in the way.” In November, Zaslav acknowledged the streamer had yet to successfully become a destination for that consumer subset.

“We haven’t really been able to crack the kids,” the CEO said on the company’s November earnings call, promising WBD would “attack that” as a selling point that differentiated it from other streamers.

What a difference six months makes.

As Max bundles with Disney+ and Hulu, subscribers to that particular bundle don’t need to worry about going to Max for kids and family content – they already have Disney+ – and Warner Bros. Discovery can relieve the pressure of trying to compete so heavily in that space.

“We can get back to investing in prioritizing our lanes and our key content, they can do theirs,” Perrette said. “Synthetically, these bundles allow us to do that while still providing the consumer with a very attractive price for the combination of products. Even if [the consumers] don’t use a service in one month, they still feel like they get great value, and they might use it the next month.”

In practice, that could mean WBD leans into what’s working best on Max — namely prestige HBO shows like “House of the Dragon,” “The White Lotus” and “The Last of Us” — while allowing Disney+ and Hulu content to complement each other.

As Perrette described it, the bundle is “the greatest offering of kids and family content, the greatest offering of adult fare, the greatest offering of scripted and non scripted content.”

Disney+ and Hulu combo app bearing fruit

News of the bundling comes on the heels of Disney+’s successful integration of Hulu into its app, which allowed subscribers to both streamers to access their respective content in one place. The Max/Disney+/Hulu offering is a bundle not an app — it’s one subscription, but there won’t be a Max tile on Disney+.

Already Disney is seeing results from the combo as FX’s acclaimed drama series “Shogun,” which started rolling out weekly installments a month before Hulu on Disney+ launched, drove the largest number of signups to their streaming services since 2022’s “Black Panther: Wakanda Forever.”

Perette acknowledged that given “the dynamics of the existing landscape, obviously Amazon and Netflix are both incredibly compelling, have great offerings and have become sort of utilities.” But the Disney-WBD bundle “plus one or two of those other services pretty much can make up the entertainment experience for most consumers, very happily.”

Max has found its dance partner, but that leaves Peacock and Paramount+ further in the dust. NBCU’s streamer is hiking its prices ahead of the Olympics in a bid to narrow its streaming losses, but it’s still trailing its competitors at 34 million paid subscribers.

Paramount+ is closer to the big dogs with over 71 million subscribers. The company narrowed its streaming losses to $286 million in the first quarter of 2024, but compared to Disney+ (150 million subscribers) and Netflix (260 million subscribers) it lags behind.

In assessing the landscape, Zaslav said Thursday the marketplace has decided that tech companies like Apple and Amazon, which are skilled at delivering content with their existing distribution ecosystems, are winning out, so the move to bundle and create a greater market force is necessary to survive.

“There’s this question of distribution vs. content. I’ve always felt that in the long run, the best content wins, and that’s why we’ve really focused on the creative side of our company,” he said.

“The marketplace right now has looked at the great distribution companies and has assessed that the distribution companies are the companies that are going to be the big winners. But I believe that distribution companies and great content companies will be the winners.”