Back in May we heard the news that Warner Media and Discovery, Inc. would be merging to form ‘Warner Bros. Discovery’, headed up by Discovery CEO David Zaslav.  

Warner Media has already built up an impressive repertoire of brands over the years, including Turner Broadcasting, HBO, Cinemax and Warner Bros, and this most recent partnership means they now have access to a vast collection of factual and lifestyle shows from the Discovery network.

With the merger not expected to complete until mid-2022 there are many unanswered questions; we’re particularly interested in implications for the SVOD (subscription video-on-demand) side of this new venture.  

Learning from Disney and Fox

In 2019 we saw another high-profile merger between Disney and 21st Century Fox. Disney acquired the rights to multiple brands including American streaming platform ‘Hulu’ and TV network ‘Star India’.

Since launching their own streaming service, Disney+, which largely consisted of classics and franchise originals to please younger viewers, Disney has added a subsection of content aimed at a more mature audience via its ‘Star’ offer. Outside of the US, Star acts as the equivalent of Hulu – it’s a way for Disney to market content that they own the rights to that doesn’t fit into the family-friendly branding of Disney+.

While Disney+ was rapidly accumulating subscribers, it was also making plans to utilise this new content, and earlier this year they made the following changes to their SVOD offering:

  1. Subscription bundling offer – US customers are now offered access to both Disney+ and Hulu (along with ESPN+, also owned by Disney) through one monthly bill of $20.
  2. New brand name – Disney chose to use the brand name ‘Star’ to house its mature content internationally, as Star is a better known brand than Hulu in many countries, particularly Asia.
  3. All under one app – For countries that have access to Disney+ outside of the US, Star content is available as a subsection of the Disney+ app.
  4. Price increase – After the addition of Star, the price of Disney+ in the UK increased from £5.99 to £7.99.
  5. Parental controls – While there is no way to opt out of this price increase, users do have the option to turn it off using parental controls. 

In the US, much of Disney+’s growth has been attributed  to the Hulu bundle offer. Despite Hulu and Disney+ being marketed to different audiences, there is a large group of people who are likely to be interested in both. The duo will appeal to parents who get content for themselves as well as their children, while the nostalgic Disney classics that have traditionally been enjoyed by all ages will be also welcomed by older Hulu subscribers. 

Here in the UK, Disney+ has always proved particularly popular with families – MTM ScreenThink data shows satisfaction with its kids content to be higher than any other brand. But with the addition of over 450 new Star titles, Disney+ has strengthened its offer by growing its library, broadening its genres and ultimately appealing to a wider audience.

However, our latest ScreenThink data shows that perceptions of Disney+ being ‘good value for money’ have declined since the UK price rise; this early data suggests that the addition of Star content hasn’t immediately felt to warrant the higher price; or perhaps, not all are aware of the addition.

What does the future look like for Warner Bros. Discovery?

It’s not been confirmed whether Warner Media and Discovery’s current streaming services, HBO Max and Discovery+ will be bundled like Disney+ and Hulu, combined like Disney+ and Star, or continue to sit as two separate subscriptions.  

Both have strong brand identities and are very different offerings. HBO Max hosts a deep library of premium programming with a cult following – including critically acclaimed dramas from HBO and Warner Bros movies aired on the service at the same time as theatrical release. Discovery+ on the other hand has been described as ‘the non-fiction Netflix’, housing a broad range of low-cost reality and lifestyle shows that users can binge on.

If combined, could it have the potential to be viewed as a varied, Netflix-style service, with something for everyone? Although offering two services in a bundle  may have led to growth for Disney, how much overlap is there between HBO Max and Discovery+ customers? How many would find the bundle appealing enough for a higher price point? Perhaps leaving the two services as standalone remains a legitimate option.

Implications for the wider market

Huge mergers like these are impacting on an already complex and fiercely competitive SVOD market. Increasingly, brands need to stand out and compete for subscribers, who end up ‘stacking’ subscriptions to access the latest must-see series, and get the range of content that suits their tastes and budgets.

Some commentators believe that we will see more consolidation in the entertainment industry in the coming years. As consumers’ appetite for hit content is growing, streaming providers will need larger and more varied libraries to be picked over competitors.     

Will we see a move towards a landscape with fewer services, where brands consolidate in an attempt to offer consumers ‘everything’ under one big roof? Where viewers subscribe to a bundle of on-demand content, akin to pay TV, gaining access to the TV shows and films that they want, alongside content they don’t? This would be a significant contrast to the origins of SVOD, and the ‘pick and choose’ mentality, accompanied by bitesize, flexible prices that it began with.

We’ll be watching with interest to see what happens in this area, and looking to future waves of ScreenThink to measure the effects on consumers’ viewing.