Monday AM Briefing: Incoming Warner Bros. Discovery Leadership Meet HBO Max's Purchase Funnel
On Wednesday I built the Member Mailing - Comparing Netflix & HBO Max Conversion Funnels - around an opinion column from Marketing Week’s Mark Ritson that argued (emphasis in bold mine):
Netflix is testing a stricter approach to passwords and subscription. Not because they have suddenly become mean spirited or more authoritarian. But because their funnel is telling them do it.
By “funnel” Ritson is referring to a purchase or conversion funnel, and that phrase in bold has stuck with me since I first read it.
It’s worth asking the question of what Warner Bros. Discovery's (WBD) funnels are telling it after Warner Bros. Discovery (WBD) CEO David Zaslav told WBD employees last week that he envisions: “one [streaming] platform that we take everywhere in the world in every language.”
But, is that what the funnels of Discovery’s suite of apps and HBO Max are telling WBD management to do?
From everything that has been reported from the global town hall - and those reports have been everything from reporters tweeting to CNN issuing its own report on the meeting - the answer seems to be “less is more”. According to CNN, Zaslav told the audience that consumers want “easy, easy, easy,” rather than switching between multiple services.
But then what do consumers want from one service as opposed to multiple services? Zaslav told the audience:
“We have almost 40 channels on any given night, 40 percent of Americans watching one of our channels and so we have we create one platform, but we have so much content that we have to figure out how do we use that content to nourish?”
What Zaslav is saying here is nothing new to those who have been listening to him over the past few years. “Nourish” is a term he uses often in describing Discovery’s value proposition in streaming. But, it doesn’t reveal much as to what the funnel is telling WBD management to do.
What has the Discovery+ funnel been saying?
Generally, funnel logic has tended to be missing from Zaslav’s presentation of Discovery’s and Warner Bros. Discovery’s futures, to date. And, in the past when they have discussed direct-to-consumer logic with investors, it has been for smaller successes like Food Network Kitchen with Amazon. As Zaslav told investors in Q2 2020:
Well, look, everything that we've done, we've been in the direct-to-consumer business for the last couple of years with the Eurosport Player, with Dplay, with Food Network Kitchen and each one of them, we've learned, we've fallen down, we've picked ourselves up. What do people like, what do they want more of, how do we create a product that people love every month, reduce churn, how do we get partners to help us?
Less than one year later Zaslav announced Discovery’s merger with WarnerMedia, telling the media that the move was made out of necessity.
It is also worth noting something JB Perette, President & CEO of Discovery Streaming & International, told the virtual MoffettNathanson Streaming Wars Summit last December:
“We have learned a lot over the last eight years, and we made a lot of mistakes, frankly,” Perrette said, explaining that the firm was “trying to figure out” how to market the Eurosport Player as a stand-alone streaming service of the Eurosport network in Europe for years. “How do you make sports more than a pay-per-view business, which becomes very challenging from a churn perspective,” he explained.
Generally speaking, the incoming Warner Bros. Discovery management has executed well but not optimally against whatever the purchase funnels of its suite of streaming apps may have been telling them.
Will this all change at WBD?
It’s worth asking whether that will change with a larger portfolio. Because understanding the funnel is key, and all WBD management are on a learning curve with the HBO Max funnel.
Notably, the HBO Max funnel was built to be purely direct-to-consumer (DTC) and rejected third-party distribution models like Amazon Channels and The Roku Channel. Discovery+, on the other hand, has actively embraced those models. Those are two very different conversion funnels and more importantly two very different customer relationships - effectively the difference between shared (discovery+) and 100% owned (HBO Max).
More importantly, HBO Max's funnel was sophisticated and, in its first iteration, built narrowly around Hollywood tentpoles. These funnels left HBO Max “economically ahead”, as Kilar explained to Puck’s Matt Belloni, and not burning cash as most outsiders had suspected. HBO Max found ~3.3X the audience of discovery+ (73MM to 22MM) in a similar amount of time with that strategy (though this is an apples-to-oranges comparison as HBO Max includes HBO subscribers with access to the HBO Max app).
What's next?
The majority of the WarnerMedia executive leadership who built those direct-to-consumer funnels left WBD just under weeks ago. Perhaps they were able to brief their replacements on the inner workings. But, they are not in the building to help WBD management understand the finer details of HBO Max's conversion funnels worldwide.
This points to a question that may - and should - loom over WBD: what are the HBO Max conversion funnels and customers telling incoming WBD management? What's similar to the Discovery+ funnels? What's different? Can they reconcile these differences?
And, above all else, does the incoming management understand what HBO Max's funnels and customers are telling them differently than Discovery+ consumers?
Because if not, Zaslav’s vision of “one platform” for WBD may not only be impractical for this management. It also may be the wrong objective with this team and this new collection of assets.
Must-Read Monday AM Articles
* The Hollywood Reporter dove into Zaslav's executive changes at Warner Bros. Discovery
* WBD will have "a real appetite to build out their sports content".
* Axios's Sara Fischer and Tim Baysinger offered a good overview of the merger
* Ad buyers are expecting the merger "to be a little bumpy at the beginning"
Emerging "Metaverse"-type convergence strategies
* The Bored Ape Yacht Club promised to take care of members who ran into technical issues during March 28th’s merch drop by giving those impacted apes their orders for free.
* Chris Dixon who leads crypto investing at venture capital firm Andreessen Horowitz, or a16z, gave a must-listen/must-read interview to Nilay Patel of The Verge. There is a section of the discussion about the music industry and NFTs that I found particularly insightful. He is also the new no. 1 on Forbes’ 21st annual Midas List of top venture investors.
* Yat Siu, executive chairman of Hong Kong-based metaverse start-up Animoca Brands, believes the biggest threat to Web3 isn’t regulation but companies like Facebook and Tencent
* Apple CEO Tim Cook used a speech at the IAPP conference in Washington, D.C. today to frame the sideloading of apps, and legislation that would permit it, as a threat to privacy and security. Apple also released a research paper on the topic.
* Meta is "beginning to test several new tools that will enable creators to experiment with different ways to monetize what they’re building in Horizon Worlds
Aggregator 2.0
* Subscriptions are the future of gaming, "but nobody agrees on the details"
* Amazon CEO Andy Jassy sent his first letter to shareholders, and it included two paragraphs on Prime Video and Prime Video Channels
* Courtney Holt, Spotify’s head of talk partnerships, editorial and global markets (and a former colleague of mine at MTVN), will transition to an advisory role next month.
Sports & Streaming
* Sinclair Broadcast Group and Charter Communications have announced an agreement to keep Sinclair stations on TV for Spectrum subscribers. Specific details weren’t provided.
* The NFL is considering creating a streaming service of its own. ($ - paywalled)
* YouTube will stream 15 MLB games during the 2022 season, starting with the Washington Nationals versus the Colorado Rockies on Thursday, May 5.
* FIFA, the highest governing body of international soccer, has launched digital platform FIFA Plus with plans to stream 40,000 live games per year.
* NBA Commissioner Adam Silver wrote an opinion piece predicting the NBA's next 25 years
Creative Talent & Transparency in Streaming
* N/A
Original Content & “Genre Wars”
* Colin Decker, CEO of the Sony-owned anime streaming service Crunchyroll, did an interview with Protocol's Janko Roettgers the same week it announced it would remove simulcasts from Crunchyroll’s free, ad-supported tier (and he explains the decision in the interview).
* Sarah Lyons, head of HBO Max’s Product Experience, shared with Protocol why the original HBO Max went to market with the faster and cheaper choices of "faster, cheaper, better - pick two"
* CNN+ had a mixed week of headlines - reporting 100K+ subscribers in its first week ($ - paywalled). All Your Screens' Rick Ellis interviewed Amanda Wills, VP of Content Programming For CNN+
* Amazon Prime Video greenlit seven new French Amazon Original productions
* Television is hooked on scripted dramas based on real life. But they rarely measure up either to actual life or to actual drama.
Comcast’s & Paramount's Struggles in Streaming
* N/A
AVOD & Connected TV Marketplace
* Mike Shields asks, after its acquisition of Xandr from AT&T, Could Microsoft be plotting a CTV sneak attack?
* YouTube is partnering with Nielsen to help advertisers understand how their YouTube CTV and YouTube TV reach delivers in comparison to other services
* IMDb TV will be known as Amazon Freevee beginning April 27. TVRev's Alan Wolk argues "there’s a whole world of ways Amazon can boost the value of its advertising while collecting even more data, and chances are it’s just waiting for all that DC regulatory hullaballoo to die down so it can get back to business."
* The majority of TV sets are now Smart TVs, according to a recent report by Hub Research
* Variety VIP's Gavin Bridge dove into Diginets and the 23MM American homes that regularly use antennas to watch OTA content in the U.S. ($ - paywalled)
Other
* How Netflix tests Netflix: The story behind the service’s new two-thumbs-up feature