Warner Bros Discovery Hikes Max Streaming Prices to Cut Costs

By: Alyssa Miller | Published: Jun 01, 2024

Every streaming service struggles to find new ways to make their platform profitable. While rising costs are one way to do this, streaming services like Disney+ and Netflix took the extra step forward by cracking down on password sharing.

Warner Bros. Discovery is looking to follow suit and might be exploring new ways to cut costs for its streaming service, Max.

WBD Set to Layoff More Employees

Bloomberg News reported that these cost-cutting plans could include possible layoffs at the media giant. This round would add to the company’s 2,000 positions that have been eliminated over the last year.

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These layoffs have been part of WBD CEO David Zaslav’s attempt to eliminate the company’s massive debt.

Cutting Jobs in Marketing and Technology

The company’s streaming business, which includes Max and Discovery+, could save hundreds of millions of dollars by cutting jobs from marketing and technology.

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In 2022, 26 percent of the WBD workforce had been cut, and its writers’ and directors’ workshops had been closed to keep costs low.

Increasing the Cost of Max

Another money-making move for the company includes raising subscription fees for new and existing customers. Max’s starting price for US subscribers is $9.99 monthly for the ad-supported plan.

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The price increase, which hasn’t been reported yet, will help the company reach its goal of $1 billion in earnings from the streaming service in the next year.

Focused on Growth

“The company is focused on the long-term growth of the business overall, including Max, which has been a priority across WBD to expand the original content offerings for our streaming audiences including news originals from CNN, March Madness, and NBA Finals from sports, local language content from international, and a new distribution deal with A24,” WBD said in a statement to Bloomberg.

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While Max offers a plethora of entertainment for audiences, the company has been removing its more expensive projects from its streaming library.

WBD’s Turn Isn’t Surprising

WBD’s pivot might not be surprising since it, and most of the other entertainment giants reported a loss in revenue in the last quarter. This prompted stockholders to back away from their investments.

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WBD’s stock fell to an all-time low last week as it attempted to retain broadcasting rights for NBA games.

The Risking Of Losing a Big Win

WBD risks losing media rights for the NBA to competitor NBCUniversal. The media giant said that they were “hopeful” for a deal.

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“We’ve enjoyed a strong partnership with the NBA for almost four decades. We’re in continuing conversations with them now, and we’re hopeful that we’ll be able to reach an agreement that makes sense for both sides,” WBD CEO David Zaslav said on the company’s first-quarter earnings call (via Yahoo!).

A Drop In WBD Stock

The company reported that its first-quarter earnings missed expectations on both the top and bottom lines.

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The company’s revenue came in at $9.96 billion, missing Bloomberg consensus expectations of $10.27 billion. This is a 7 percent drop compared to the $10.70 billion reported in Q1 2023.

The New Era of Media

This new era of media has made it difficult for media giants like WBD to stay afloat. Network advertising revenue has fallen by 11 percent in Q1 from last year, meaning that companies are missing network ad revenue expectations.

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Streamers are pivoting toward an ad-based environment, making it the more affordable (if not still expensive) option for customers.

Not Enough Wins

While high-profile movies like “Dune: Part Two” have made a profit for the company, WBD is seeing many of its other titles, like “Suicide Squad: Kill the Justice League,” have been underperforming.

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The company’s direct-to-consumer streaming business is also dipping, as fewer subscribers are signing up for the platform.

A Light In The Darkness for WBD

While there have been numerous issues with WBD, there were some shining moments for the company.

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“With our strong start in Q1, I expect us to remain profitable in the DTC segment during 2024, despite the heavy launch investments,” WBD CFO Gunnar Wiedenfels said on the call.

The Future of WBD

Max is teaming up with Disney this summer to offer a bundle of Disney+, Hulu, and Max, hoping to bring more subscribers to all three platforms.

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“I remain fully confident in our path to achieve our $1 billion-plus EBITDA target for 2025 and our growth ambitions thereafter,” Weidenfels said.