Mic Drop #30: My 2021 Predictions for HBO Max & Discovery Came True

Well, not *all* of them came true...

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With Monday’s announcement that WarnerMedia and Discovery had agreed to a merger, I get to drop the mic on quite a few predictions.

I’m two for two on the biggest predictions I made in Learnings from 2020, Predictions for 2021 deck for WarnerMedia and discovery+.

  1. HBO Max outperforms expectations with a solid content slate, but struggles with a learning curve for direct marketing HBO Max, and

  2. Modest AVOD and SVOD growth forces Discovery into an acquisition by a third-party

The overall press story from AT&T CEO John Stankey and Discovery Chairman and CEO David Zaslav was that Q4 2020 earnings spooked both of them about their stand-alone growth prospects. As I wrote for Members on Tuesday, after seeing those results

Zaslav realized:

With Disney accelerating at that point because of COVID, I just looked at that and thought who could take that on? Who could be a global offering that formidable,” Zaslav said. “When you put us together — Batman, Superman, Wonder Woman, ‘Game of Thrones,’ ‘Sex and the City,’ HBO and Discovery being everywhere in the world with local content — we’re better together. I’ve been doing deals my whole life. The standard always is, are you better together? In this case were are not just better together. We are the best media company in the world, more global than anyone else with all the news, sports, entertainment and huge tentpoles that we bring together.”

In other words, Zaslav and Stankey were spooked by Disney+ growing by 21MM subscribers, and Hulu grew by 4MM between fiscal Q4 2020 and fiscal Q1 2021. HBO Max had gained 6.8MM new subs that quarter, and by February Discovery had gained 6MM.

HBO Max and discovery+ were growing, but modestly compared to Disney and Netflix. A merger was the best outcome for both.

Two for two.

One More Mic Drop

There’s a prediction I made in the deck that got confirmed by last Friday’s WSJ piece on Jason Kilar. The public reception of that article went from grudgingly enthusiastic to tragic over the course of one weekend.

I predicted:

AT&T CEO John Stankey will spend big to win back some unhappy talent and agents, and WarnerMedia CEO Jason Kilar’s bet on “For the fans” will have unusually high-profile successes, but WarnerMedia’s business will feel its Hollywood failures well after 2021.

Joe Flint wrote in his piece:

To appease the talent, Warner Bros. had to cut new deals, which cost the studio more than $200 million, people familiar with the matter said. HBO Max also had to pay high license fees for the movies.

“Our intention was to always make sure people felt fairly compensated,” said Ms. Sarnoff. 

During the recent walk and talk on the Warner Bros. lot, Mr. Kilar acknowledged it might have been better to give the studio’s creative partners a heads up, but said it was more important for him to control the decision and deal with any fallout as it arose. 

The bet has paid off so far, Mr. Kilar said. 

$200MM and high license fees has made some of the unhappy voices happy, but there still seems to be some “vitriol” lingering.

I nailed this one, too.

And a list of misses

I didn’t get everything right.

Here is a list of predictions that I got wrong in the deck.

  1. WarnerMedia executives get cold feet with HBO Max AVOD launch because of execution risk to HBO brand and risk of dilutive effect to HBO brand. (NOTE: the AVOD is launching next month)

  2. At least two high profile Discovery cooking talents will make Substack-esque moves towards monetizing their brand outside of the Discovery ecosystem. (NOTE: this has not happened, few signs it will)

  3. Discovery will buy more Free-To-Air channels in international markets as an obvious but never-discussed hedge for its streaming strategy. (NOTE: this has not happened, few signs it will)

  4. So, WarnerMedia will pivot toward an AVOD from CNN and another with content from TBS, TNT and Warner Bros. film library. (NOTE: some early signals this is what discovery+ could become)

  5. discovery+ is the most Curse of The Mogul launch of 2020: there is a compelling unscripted-only streaming business to be built with Discovery’s IP,  but not with discovery+ as is. (NOTE: this deal proves there is no “big” unscripted-only streaming business to be built and succeed in this streaming marketplace)

I am going to keep an eye on #s 2, 3 and 4 post-merger. There is enough uncertainty in the deal terms and the moving pieces (as I wrote on Monday) that they still may come true.