How Can Warner Bros. Discovery Keep discovery+ Customers When Service Combines with High-Priced HBO Max?

It was just about two months when Warner Bros. Discovery’s President and CEO of Global Streaming JB Perrette began hinting that HBO Max customers could expect a forthcoming price increase. However, at the time, it would have been logical to assume that the hike would accompany the already announced merger of the service with corporate sibling streamer discovery+ which is currently slated for this spring.

However, that costly eventuality happened sooner than expected as on Thursday, WBD announced that it was raising the monthly rate on its ad-free HBO Max tier from $14.99 to $15.99. No pricing jumps for the ad-supported or annual tiers were announced, but considering that HBO Max will presumably cease to exist long before any new annual plans expire, that is probably not a surprise.

Despite being relatively small, this price increase — the first in the streamer’s history — will more than likely have an impact on even more people than just HBO Max subscribers; in fact, it quite possibly could affect a large group of people who don’t even subscribe to the service. With the soon-to-launch unified service — reportedly to be dubbed Max — presumably just weeks away, Thursday’s HBO Max move feels like a precursor, of some sort, to whatever the company is planning to announce next. Whether this is a move to get the price to the level of the combined Max platform, or to bridge the gap between to what will be an even higher monthly rate is yet to be seen.

However, what we do know is that there are roughly 20 million households that will feel the sting of this price increase even if they are not subscribed to HBO Max. At the end of the second quarter of 2022, WBD reported that discovery+ had 24 million subscribers while HBO Max had 76.8 million. However, there was relatively little overlap between the sibling services; at the time, only 4 million customers were signed up for both. Since then, Warner Bros. Discovery stopped disclosing the subscriber counts for each individual service, so we don’t know if those totals have ebbed or flowed since then, but if we use the totals from six months ago, that would indicate that there are 20M customers who are currently paying WBD monthly subscription fees — discovery+ does not offer annual plans — but have no interest in HBO Max content.

Currently, discovery+ subscribers pay either $4.99 for the ad-supported option or $6.99 for ad-free. Even assuming that the rates for the forthcoming Max stay where they are now, that would represent either a $5 or $9 per month increase for approximately 20M customers who did not ask to have access to HBO library of prestige TV and blockbuster movies. The price hike would be even more if WBD raises the monthly rate to an estimated $20. The question then would become whether the unending archive of true crime, home renovation, viral dating, and cake decorating shows are worth anywhere from a 100% to 280% price increase to people who are not interested in binging “The Sopranos,” “The White Lotus,” “Game of Thrones,” “Sex in the City,” “The Wire,” or “Euphoria”?

WBD execs have been steadfast about this merger, in fact, they were publicly discussing the combination of the streamers even before Discovery officially acquired WarnerMedia; but for a company that has been so focused on squeezing every penny out of its properties that it possibly can, can it risk losing a sizeable portion of those 20M customers due to an exponential price hike?

A Warner Bros. Discovery spokesperson declined to comment on how the new price increase would impact the combined service’s pricing structure or whether discovery+ customers would receive any sort of special dispensation against having to pay an exorbitant amount for content that they are not interested in. However, it would seemingly behoove WBD to come up with a plan to keep those customers satisfied with both their streaming price and experience.

WBD CEO David Zaslav comes from the Discovery side of the company and is attempting to remake the Warner Bros. arm in the image and likeness of his uber-popular lifestyle outlets, so it seems unlikely that he would simply abandon the viewers and customers that he has built his career on. So, what could Zas do to keep everybody happy and subscribed?

Keep discovery+ and HBO Max Siloed in Merged Max Platform

Last summer, Paramount Global decided to finally integrate its premium cable streaming service SHOWTIME with its flagship platform Paramount+. However, instead of just moving all of Showtime’s content to its general entertainment streamer, it created an in-app bundle that allowed Paramount+ subscribers to add-on the Showtime titles without having to exit Paramount+.

This would seem like the most logical model for WBD to follow; it would allow the customers who are currently paying a fraction of what HBO Max costs to have access to the newand improved platform without having to have their prices jacked up. Max could even provide occasional free previews to the full library, or make the first seasons of certain shows available on the discovery+ side of the line of demarcation between the two disparate libraries.

While theoretically WBD could do the same in reverse — allow customers to only sign up for the HBO Max half of the platform — that seems unnecessary. With the recent price increases, the executives certainly know where the magic number is for their customer base, and it’s probably not that much higher than what they are charging now. So, if you make the subcription options just “Discovery content only” or “all of the content,” that would seem to make the most sense.

Allow Existing Customers Only to Maintain Individual Subscriptions Inside New Platform

Another option could be to just let the people who already subscribe to discovery+ (or even to HBO Max, for that matter) to keep their service unchanged, but force all new customers to opt for the combined service. Now, I don’t know how that would work in the yet-to-be-unveiled, new-and-improved platform, but it seems relatively simple to bifricate the content down the middle, especially since it’s unlikely that the existing services will remain active when the new one launches.

In early January, WBD CFO Gunnar Wiedenfels discussed how important it was to improve the tech and user interface before launching the new combined server, because, HBO Max hasn’t lived up to the company’s expectations. So, it seems unlikely that WBD would allow the existing discovery+ and/or HBO Max products to continue to live out in the streaming world with a theoretically better platform on the market.

So, when customers are eventually migrated from their existing service to the new one, WBD could allow their current subscriptions to transfer as well. That way, if someone is only signed up for discovery+, they could still access the content that they are willing to pay for, without having to be saddled with the sizable price increase. Again, the company could do this for HBO Max users as well — and it feels slightly more appropriate in this situation than the one above — but I’m not sure that would be necessary either.

Subscribers would be able to maintain their individual subscription for as long as their account stayed active, but once they unsubscribe, if they return, they would have to pony up for the fully integrated version of the streamer.

There are likely many other creative ways that Warner Bros. Discovery could configure its forthcoming service to keep discovery+ fans subscribed, but it feels like the company has no choice but to do something as the price point for the unified service — whatever it is eventually called — would be seemingly untenable for customers used to paying a fraction of the cost, and I don’t think WBD can risk losing anybody willing to pay anything for their products right now.