Yesterday, Discovery executives reassured investors that they don’t plan on overspending on content as the company merges with WarnerMedia in April. CEO David Zaslav said, “Our goal is to compete with the leading streaming services, not to win the spending war.”
Zaslav acknowledged that Discovery doesn’t know exactly what they need to do to appease investor concerns just yet, however, he noted that the company has strong free cash flow and will spend it carefully, “You’re not going to hear us say we are going to spend $5 billion more,” he said. “If you say we do 600 hours on Food Network and they like it and we make $400 million, for example, if we did another 400 hours of content, maybe audiences would be a little happier, but we would make no money.”
Referring to HBO and HBO Max content chief Casey Bloys, Zavlav remarked, “If you look at what Casey is doing with HBO, he has ‘Euphoria’ and had ‘Succession’ and has period drama ‘The Gilded Age.’ Would HBO be doing a lot better if it had three more really successful scripted series right now? It’s not clear.”
Data from Wells Fargo revealed that content spending among Disney+, Netflix, HBO Max, discovery+, Peacock, Amazon Prime Video, Paramount+, Apple TV+, STARZ, and AMC+ will reach $140.5 billion in 2022, a 10% jump year-over-year. This figure is predicted to increase to approximately $172 billion by 2025.
Wells Fargo predicted that the combined Warner Bros. Discovery company would up its content spending to $22.4 billion this year. This figure would up 8.2% from 2021. The significant 2022 content spend will partially go toward rights for sports like baseball and basketball.
In comparison, The Walt Disney Co. plans to spend $33 billion in 2022, $8 billion more than the content spend in Disney’s 2021 fiscal year. The large number is attributed, in part, to the desire to expand its reach on streaming through Disney+, Hulu, and ESPN+.
Netflix’s spending habits, on the other hand, are breaking the bank for big names, yet its original hits are known for not staying on the shelf for that long in recent years. So to Zavlav’s point, do these types of investments drive enough subs for the price point to be worth it? Plus, it is estimated that Netflix’s cash-flow margins will drop to 2%, according to research firm MoffettNathanson. The constant spending means that the company’s free cash flow margins are regularly weighed down.
Zavlav went on to say that even though discovery+ wants to compete with Disney and Netflix, Discovery has a very different audience, therefore needs a very different strategy. He called Discovery’s content library “nourishment” and Warner’s content “shock and awe,” and said the combination makes for “a really compelling menu.”
The exec has touted this content “menu” before, having once said “I think we have the best IP menu in the world” and even brags about having “a library almost as big or bigger than Netflix.”
Discovery+ has a lineup of notable titles that reality TV, true crime, and history buffs love. Most known for its Food Network and HGTV programming as well as TLC, ID, and Discovery Channel, fans turn to the streamer for shows like “Diners, Drive-Ins, and Dives,” “90 Day Fiancé,” “MythBusters,” and more.
Two new true-crime series will be arriving on discovery+ in March as well: “Holy Heist” (March 15) and “Hillsong: A Megachurch Exposed” (March 24). The new season of “Cabins” debuts next month too, along with season 25 of “Ghost Adventures.”
However, Netflix has some hit reality series as well, including viral hits “Love is Blind” and “Too Hot to Handle.” Disney is also entering the reality space as it is set to produce or commission 60 unscripted series in 2022, according to a 10-K filing.
The upcoming $43 billion merger of AT&T’s WarnerMedia and Discovery will combine movie studio Warner Bros. with linear TV networks including CNN, TBS, TNT, Discovery, HGTV, Food Network, TLC, and Animal Planet.
The agreement will be on everyone’s mind as observers will be anxious to see if the new company will merge or package its host of DTC services; HBO Max, discovery+, and the soon-to-launch CNN+, which just announced its original content lineup.
Based on Zavlav’s comments, the big question will be how much does the company spend on content and where? It is likely that HBO Max will get its usual streaming-exclusive movies and original series with big names (and big bucks) and the familiar, relatively inexpensive unscripted programming will head to discovery+.
discovery+
discovery+ is a video streaming service that offers more than 70,000 episodes of 2,500+ current and classic shows from several popular TV brands including Discovery, Investigation Discovery, HGTV, TLC, Food Network, A&E, Lifetime, and History.