HBO Max, discovery+ Provide Blueprint for Streaming’s Rebundling Era

As the foundations of the streaming world continue to shift, the industry has the opportunity to witness a real-time case study into what the future might look like thanks to Discovery’s recent acquisition of Warner Media. Before merging into Warner Bros. Discovery, CFO Gunnar Wiedenfels announced in March that both companies’ streaming services — discovery+ and HBO Max — would initially be bundled and eventually merged. Then at last week’s Upfront presentation, WBD’s head of global streaming JB Perrette confirmed that the unified service was coming “in the not-too-distant future.”

As WBD execs plot out exactly how to move forward, research firm Parrot Analytics did a deep dive into the rebundling era by focusing in part on the two corporate sibling services. The report notes that perhaps no pair of streaming platforms could be more different than discovery+ and HBO Max, and that fact could prove to be what ultimately makes the bundled services attractive to consumers.

The two streamers are not only different in terms of what type of programming they offer consumers, but those programming differences lead to having markedly different clientele. And while putting the scores of content from both services into a single platform might be overwhelming and offputting for some users interested in only their specific brand of entertainment, by providing more options to viewers, Parrot believes that WBD is making the best play to build a robust subscriber base.

While only 4% of HBO Max’s content falls into the reality TV category, that same genre accounts for nearly 70% of the content on discovery+. These two complementary libraries make for an interesting value proposition specifically because of how disparate they are. HBO Max is the home to some of the premiere content on streaming while discovery+ is the hub for a wide range of unscripted content.

Parrot hypothesizes that combining these two libraries — either via bundling or merger — will be far more successful in increasing subscriptions and revenue than if HBO Max wound up being joined by a service with similar offerings. HBO Max offers some of the most sought-after scripted content in the industry with HBO’s deep archive of prestige dramas, Max Original comedies, high-profile movies, animation, and children’s programming. Alternatively, discovery+ is populated by cooking and baking, home decorating, true crime, and dating shows.

Related: WarnerMedia and Discovery Merger: What It Means for HBO Max, discovery+

If HBO Max were to merge with a service similar to itself — say Apple TV+ or Disney+ — the newly accessible content that the partnership would provide would certainly appeal to many users, but it is not likely to move the needle significantly, because of the existing overlap between subscribers. On the other hand, by pairing HBO Max’s premium content with discovery+’s basic cable-style options, consumers now have a reason to sample — and hopefully subscribe to — a service that they might not normally be interested in.

“In a scale play, complimentary moves come from identifying weaknesses and building around those weaknesses to ensure each arm is doing its job,” Parrot’s analysis says. “It’s a way to make the perceived value of a product suite better than the perceived value of only having one or the other; for just a few dollars more, you’re actually saving. It’s not true, but if customers are already going to buy into two of three services, it’s a way to reduce churn across the board.”

Watching how WBD handles its services moving forward — and more importantly, how consumers respond to such moves — will be very informative as other companies contemplate combining multiple streamers in various ways.

But beyond uniting the services’ divergent offerings, by diving into who is using both platforms, Parrot was able to get an important look as to who a unified streamer could most appeal to. While both services have reality and documentary content (the latter makes up 23.9% of discovery+’s offerings and 5.3% of HBO Max’s) the vast majority of programming has little or no overlap between the services.

When looking at HBO Max and discovery+ users by self-identified gender, Parrot found some shifts even amongst categories that the two services overlap.

“On HBO Max, documentary programming skews much more female compared to Discovery+ where the breakdown in documentary programming is much more equal between men and women,” the report noted. “Similarly, where drama on Discovery+ skews much more female, it’s a much narrower gap on HBO Max where there’s more variety.”

Additionally, when breaking out the services’ users by age, you can see what types of content appeal to different demos on each platform. The vast majority of discovery+’s users fall into the Millenial and Above 40 age ranges thanks to their blend of lifestyle and true crime reality and documentary content.

Conversely, HBO Max users skew younger in part because their scripted comedies and dramas — more than half of the service’s content — are the primary viewing option for users aged 22 to 28 on the platform.

When WBD’s CEO David Zaslav was heading up Discovery on its own, the company introduced individual standalone streamers for each of the company’s cable networks — HGTV, Discovery, Food Network, Investigation Discovery, and more. However, despite the popularity of each network on cable, their streaming hubs had little to no impact.

But when all of the streaming channels were unified under the discovery+ banner, the company saw an incredible increase in active users and revenue. This experience is the driving force behind WBD’s new streaming strategy. So as Paramount looks to bundle Paramount+ and SHOWTIME and rumors abound about Disney potentially merging Disney+, Hulu, and ESPN+, how WBD handles what’s next for discovery+ and HBO Max could very well be the blueprint for the next wave of streaming changes.