March 17, 2022 | 4 min read
Abby is PMG’s senior managing editor, where she leads the company’s editorial program and manages the PMG Blog and Insights Hub. As a writer, editor, and marketing communications strategist with nearly a decade of experience, Abby's work in showcasing PMG’s unique expertise through POVs, research reports, and thought leadership regularly informs business strategy and media investments for some of the most iconic brands in the world. Named among the AAF Dallas 32 Under 32, her expertise in advertising, media strategy, and consumer trends has been featured in Ad Age, Business Insider, and Digiday.
A flurry of exclusive content deals and platform developments across the streaming TV landscape were announced in recent days as media giants like Apple, Discovery, Disney, and NBCUniversal continue to wrestle for market dominance against the backdrop of increasing consolidation and changing viewership trends. Streaming platforms stand to gain as cable TV viewership wanes, with new content offerings and subscription plans unveiled, just in time for Upfronts season.
The Discovery and WarnerMedia merger is on track to close as early as next month following Discovery shareholder approval of the $43 billion deal late last week, shortly after it gained antitrust clearance from European and U.S. regulators.
The post-merger strategy of the new company, known as Warner Bros. Discovery, has largely been kept under wraps since the deal was first announced last year, though as the final preparations are made before the ink dries, new details are coming to light.
Catch up quick: The merger between WarnerMedia and Discovery will transform the media industry, combining two media powerhouses into one firm with a robust portfolio of content libraries, film studios, and streaming services. WarnerMedia owns HBO, HBOMax, Cartoon Network/Adult Swim, CNN, Warner Bros., DC Films, New Line Cinema, TBS, TNT, TruTV, and Turner Sports, among other brands, and is part owner of the CW Network alongside Paramount. Discovery is the parent company of Discovery Plus, Discovery Channel, HGTV, Food Network, Travel Channel, Turbo/Velocity, Animal Planet, and OWN (Oprah Winfrey Network), to name a few.
In a webcast during the Deutsche Bank 30th Annual Media, Internet & Telecom Conference, Discovery CFO Gunnar Wiedenfels, who will soon serve as CFO of the newly combined Warner Bros. Discovery, announced that streaming platforms Discovery+ and HBO Max will eventually merge into one streaming service, dispelling speculation the two streaming rivals would remain solo platforms post-merger.
Wiedenfels argued that combining the subscriber acquisition power of HBO Max with the customer retention power of Discovery+ content will make for a “blowout DTC product.” However, before they are officially combined, the first step will be “some form of bundling,” as the new company works to merge the two sets of content offerings and platforms.
“The merger between WarnerMedia and Discovery will transform the media industry, combining two media powerhouses into one firm with a robust portfolio of content libraries, film studios, and streaming services.”
“The streaming landscape is in a constant state of consolidation as media giants, like WarnerMedia and Discovery, combine forces and create even bigger media conglomerates,” said Kia Igel, Brand Media Supervisor at PMG. “There’s still a lot of unknowns about the future of Warners Bros. Discovery, but in working with both WarnerMedia and Discovery from a media perspective, it will be interesting to see how ad prices and inventory models shift within the newly formed platform. The content libraries and audiences of both WarnerMedia and Discovery are quite different, so we can likely expect some pricing adjustments compared to what we’re currently used to as the future state of Discovery+ and HBO Max takes shape.”
Related: In February, Paramount, formerly known as ViacomCBS, announced Paramount Plus and Showtime will soon merge into one app.
Following the formation of Warner Bros. Discovery, an early bundling of Discovery+ and HBO Max is in store, potentially via a single sign-on, though Wiedenfels stated the competitive advantage will come with “harmonizing the technology platforms, building one very strong, combined, direct-to-consumer product and platform.”
In recent statements, executives for the new streaming giant vowed the company would take a conservative approach with cost savings as a priority, as Warner Bros. Discovery seeks to “compete with the leading streaming services, not to win the spending war,” according to The Hollywood Reporter.
In contrast, recent earnings reports by Disney, NBCUniversal, Amazon, and others, demonstrated that hefty content investments are paying off, with strong subscriber growth across the board last quarter. Disney is “arguably the biggest winner,” according to CNBC, as Disney+ gained 11.7 million paying subscribers, while Hulu and ESPN+ garnered 1.2 million and 4.2 million, respectively.
On March 4, Disney shared the news that an ad-supported (AVOD) subscription tier would be released for Disney+, a first for the company. The new subscription tier would begin rolling out in the U.S. in late 2022, with plans to expand internationally in 2023. Disney didn’t reveal the cost of Disney+ with ads, only that it would be less than the no-ads subscription tier, which is $7.99/month in the U.S.
In the announcement, Disney reaffirmed its target of reaching 230 million to 260 million Disney+ subscribers by 2024. Total Disney+ subscribers are just shy of 120 million. “Expanding access to Disney Plus to a broader audience at a lower price point is a win for everyone—consumers, advertisers, and our storytellers,” said Kareem Daniel, chairman of Disney Media and Entertainment Distribution.
“Disney is "arguably the biggest winner" of the streaming wars, according to CNBC.”
“Since Disney+ launched, advertisers of all stripes have been eager for advertising to become available on the platform, so this is a really exciting development to finally see come to fruition,” said Igel. “With the timing of this announcement, the stage will likely be set for deal discussions during the 2022 Upfronts in May, and as we’ve seen with similar rollouts like Peacock a few years ago, ads on Disney+ will likely be open to a small selection of brand advertisers to start, and soon be made available to more brands in the months to come. From what we’re hearing, Disney plans to maintain a comparatively light ad load when compared to competitors, likely to maintain the premium experience Disney content is best known for.”
Exclusivity deals for live sports, day-after-airing access, streaming rights, and bypasses to theatrical releases are all-pervasive across the media landscape as streaming platforms compete for a leg up against rival services. In recent days, NBCUniversal terminated its next-day TV licensing deal with Hulu in order to keep current season TV shows exclusive to its own streaming service Peacock.
In a statement to confirm the news with Variety, Hulu emphasized the company’s investment into original programming in lieu of third-party content, citing titles including Only Murders in the Building, Dopesick, How I Met Your Father, and Oscar-nominated documentary film Summer of Soul.
Last week, Apple announced it had gained exclusive rights to telecast two Friday Night Baseball games each week via Apple TV+, which will begin as soon as Major League Baseball begins. Similarly, NBCUniversal is said to be finalizing a deal with Major League Baseball for exclusive rights to stream games in a new Sunday time slot, according to The Wall Street Journal, as the league“looks to increase digital partnerships.”
“Exclusivity deals for live sports, day-after-airing access, streaming rights, and bypasses to theatrical releases are all-pervasive across the media landscape as streaming platforms compete for a leg up against rival services.”
Others, like Amazon, are pulling out all the stops to drive subscriber growth, investing in original content, and signing exclusive streaming deals for live sports and entertainment.
Amazon is reportedly spending nearly $500 million on just the first season of The Lord of the Rings: The Rings of Power, which is set to debut later this year, teeing up Amazon to have a surge in fourth-quarter subscribers, who will likely stick around for the long haul as Amazon gains exclusive rights to Thursday Night Football near the same time.
As streaming services find live sports (and original content) to be a major draw for increasing viewership and subscribers, a larger number of streaming platforms results in greater audience fragmentation and more walled gardens for advertisers. “We’ve been heading in this direction for quite some time, but now, it’s even more evident that there won’t be a ‘one-stop shop’ for investing ad dollars into streaming TV,” said Nadia Pesina, Associate Director of Brand Media at PMG. “Instead, these new platforms, content deals, ad types, and measurement solutions stress the importance of maintaining agility in media planning and understanding who your audience is and what they love watching most.”