What WarnerMedia and Discovery Deal Means For Cord-Cutters: Price Hikes?

In a mega-merger, Discovery and WarnerMedia will be bringing together their two empires. For cord-cutters, this has implications for those who subscribe to Live TV Streaming Services like Hulu Live TV, Philo, and YouTube TV –– along with those who subscribe to services like HBO Max and discovery+.

What Does Merger Mean For Live TV Streaming Services?

Currently, Hulu Live TV, YouTube TV, and Sling TV each offer channels from both WarnerMedia and Discovery. Hulu just last week renewed their deal with Discovery, that saw a renewal of linear channels on the service, but the removal of content from their SVOD service.

The two companies that will be most affected by the deal are fuboTV and Philo – both of which don’t carry channels from WarnerMedia. It is likely that once this deal closes in mid-2022, those companies would be required to carry WarnerMedia channels (or drop the entire Discovery portfolio) upon their next renewal.

That can only mean one thing – price hikes. Since Discovery is a major shareholder in Philo, they are likely less sensitive to price change, but fuboTV might not be so lucky.

However, it is likely that fuboTV would have had no choice to bring back WarnerMedia channels, even if the deal had not happened. Starting in the fall, TNT and TBS will have rights to NBA, MLB, and now NHL (including three Stanley Cup Finals). For a streaming service focused on sports, TNT now becomes a must-have channel in the portfolio.

Even for those that already carry channels from both WarnerMedia and Discovery, at the next renewal, it is likely that carriage costs will go up – and thus higher costs for consumers.

Will They Merge Discovery+ and HBO Max?

The combined WarnerMedia and Discovery currently spend $20 billion annually on content. That rivals that of Netflix, which currently spends about $17 billion a year.

The biggest question will be what happens to HBO Max and discovery+? Will the new combined entity merge the two services or keep them separate. It doesn’t sound like any changes are immediate. In fact, AT&T CEO John Stankey said that he expects the two companies to continue to work together - and potentially bundle the streaming services with AT&T wireless plans.

While the two companies will “fully integrate” according to Discovery’s CEO David Zaslav – whether that will happen to the streaming services has yet to be decided.

“When you look at what Bob Chapek and Bob Iger are doing with bundling strategy, that’s quite compelling, it’s working very well for them. There are other strategies of creating a super pack … and that’s going very well right now for WarnerMedia. We have flexibility here in the U.S. and around the world to determine how we create the ecosystem around the extraordinary IP, and whether we offer it in a bundle or whether we offer it together.”

Zaslav says that the power in discovery+ content is reducing churn. In talking to an executive in the streaming space, the executive told Zaslav, “If I had you, my churn would be zero.” It’s one thing to have a low-churn when your price is $4.99 a month, as is discovery+, and another when its $14.99 a month or higher, as a combined service or bundle with HBO Max would be.

The two companies have also had different philosophies around streaming marketplaces. HBO Max will be leaving Prime Video Channels later this year, a major departure from their past strategy. However, discovery+ just launched their ad-free their on Prime Video Channels – and will be rolling out their ad-supported tier later in 2022.

While the deal won’t close until mid-2022, all eyes will point to WarnerMedia’s launch of its HBO Max AVOD service in June. WarnerMedia’s CEO Jason Kilar will remain in charge for now, but whether he will remain under the combined company has yet to be seen.