Warner Bros. Discovery has announced the launch of its new streaming service, Max, which merges the content from its HBO Max and Discovery+ platforms. The service aims to compete with the likes of Netflix and Disney bundle. The combined service is expected to provide a great value for consumers in terms of dollars spent vs total content demand provided, according to Parrot Analytics data. Our analysis suggests that a market competitive price for a combo of HBO Max and Discovery+ would be roughly $17 per month, if all Discovery+ content is rolled into the combined service.
The New York Times recently reported that the ad-free starting price of the combo will be $16/month, which is roughly the same price as HBO Max without additional Discovery+ content. This makes the combo a much better deal for consumers compared to the current HBO Max Premium offering. Furthermore, it gives Warner Bros. Discovery room for incremental price increases that are unlikely to receive too much backlash from consumers.
From the analysis, HBO Max is currently slightly overpriced as a stand-alone platform by approximately $1.50/month compared to the total demand for content available on the platform, while Discovery+ is underpriced by around $2.00/month. Additionally, Discovery+ programming will allow the combined platform to reach audience demographics that HBO Max alone is not currently serving.
HBO Max needed to increase time spent on the platform, and content from Discovery+ is designed to do just that — it’s the rewatchable shows consumers put on in the background while cooking or folding laundry. This strategy should help improve subscriber retention, which will lead to higher ARPU. However, it does little to immediately address subscriber acquisition, which has plateaued for Warner Bros. Discovery in recent quarters.
The new HBO Max & Discovery+ benefits immensely from the huge content library produced by its parent company, Warner Bros. Discovery. If we look at the corporate demand shares for the main companies, Warner Bros. Discovery content is responsible for 18.0% of the demand for TV series in the US market, behind only The Walt Disney Company (20.2%) and miles ahead of the third place, Paramount (12.2%).
A high corporate demand share could be interpreted in two ways. First, as the long-term viability of the top media companies as they look to consolidate their original content’s availability exclusively onto their own platforms. That means that in the case of an escalation in the streaming wars, Warner Bros. Discovery has the overall catalog content to build out the streaming service with its own shows. And second, the company has one of the most valuable content libraries to license out, which could be a huge revenue boost in times of changing focus to short-term profit.
