Is Warner Bros. Discovery Sacrificing Billions of Dollars by Not Licensing ‘Friends,’ ‘Game of Thrones,’ ‘Sopranos’?
WBD CEO David Zaslav finds himself in a precarious position as he tries to strike a balance in licensing content from his streaming platform.
Despite financial improvements at Warner Bros. Discovery over the past year as CEO David Zaslav has cut and licensed his way to modest streaming profits, some industry onlookers still believe that the company is leaving money on the table by only taking half measures when it comes to its current content library. Wells Fargo analyst Steven Cahall, who leads a team of analysts that was responsible for issuing a downgrade on WBD’s stock rating this week and causing a corresponding drop in the company’s share price, believes that there are billions of dollars being left unrealized by WBD retaining streaming exclusivity for some of its brand’s biggest titles.
- WBD’s stock has been downgraded because of a seeming lack of merger and acquisition opportunities, as well as declining ad revenues and a struggling streaming segment.
- Cahall thinks WBD is potentially leaving “billions” on the table by refusing to license titles like “Friends” and “The Sopranos” to other streamers.
- WBD has to find the right licensing balance to boost revenues while keeping customers engaged with its own streaming service Max.
Why Did WBD Stock Price Get Downgraded?
Cahall and his team of Wells Fargo analysts downgraded WBD’s stock from Overweight to Equal Weight on Monday. An Overweight rating means the analyst believes the company’s stock will perform better in the future, whereas Equal Weight suggests that analysts think that the company will perform around average instead of anticipating an improvement.
This was done because Wells Fargo does not see a fantastic potential for WBD to grow through mergers and acquisitions in 2024. Although M&A opportunities have surfaced, like a pursuit of Paramount Global or Comcast, it seems that WBD’s debt position and the fact that it’s an election year mean that there’s no hurry from the company’s perspective to pursue any major deals. The analyst team also cited an ad market that continues to slump, and continued difficulties in finding success in streaming by WBD.
“Looking back, the ad market hasn’t improved, [direct-to-consumer streaming] growth has slowed as HBO content was lighter in ’23 + Max is perhaps not marrying the legacy-Discovery content with the HBO fan base, and licensing of marquee titles seems to be off the table given their contribution to Max engagement,” Cahall’s group concluded.
Is More Licensing the Key to a Quick Turnaround for WBD?
As Cahall notes in his justification for lowering WBD’s stock rating, the company has thus far declined to license marquee Warner Bros. titles like “Game of Thrones,” “Friends,” “The Sopranos,” “Succession,” and other high-value WBD — and specifically HBO — titles to other streamers. WBD has sent some titles like “Insecure,” “Six Feet Under,” and “Band of Brothers” to Netflix this year, but it has held some of its best content back, understandably wanting to use that content to keep engagement high on Max.
Cahall says that he believes that the decision to keep these huge titles as Max exclusives is leading to billions in lost revenue for WBD, but Zaslav has a tight rope to walk in this regard. Licensing them could lead to as much as 27 fewer minutes of engagement on Max per week, which would in turn lead to more cancelations as customers would see the streamer as less indispensable if its content were to be found elsewhere.
HBO’s CEO Casey Bloys spoke to the difficulties in finding the balance in September when he noted that titles licensed to Netflix also saw greater engagement on Max.
“I think what you have to balance is not putting too much out there so people think, ‘Oh, I’ll just wait until it comes here or here.’ So I don’t really know the right answer. I don’t think anybody does,” he said.
A number cruncher with as much of an eye for lost revenues as Zaslav has was almost assuredly aware of the fix he was stuck in before Wells Fargo analysts downgraded WBD’s stock rating. Now the question becomes whether Max will expand its licensing strategy, or have patience with other features intended to boost engagement on Max like the addition of the Bleacher Report sports add-on, which will be free to subscribers for some time.
Max
Max is a subscription video streaming service that gives access to the full HBO library, along with exclusive Max Originals. There are hubs for content from TLC, HGTV, Food Network, Discovery, TCM, Cartoon Network, Travel Channel, ID, and more. Watch hit series like “The Last of Us,” “House of the Dragon,” “Succession,” “Curb Your Enthusiasm,” and more. Thanks to the B/R Sports add-on, users can watch NBA, MLB, NHL, March Madness, and NASCAR events.