HBO Max and Discovery+ to merge, WBD seeks to provide free streaming

Yahoo Finance's Allie Canal, Julie Hyman, and Brian Sozzi break down the changes Warner Bros. Discovery is bringing to its streaming services.

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- The new Warner Brothers Discovery-- its second-quarter results suffered from costs related to the tieup. But the story from yesterday's earnings call-- CEO David Zaslav's big ambitions for streaming. Yahoo Finance's Ali Canal has the details, and the streaming is gonna look different from this company.

ALEXANDRA CANAL: It is, Julie. We got a lot of updates on that earnings call yesterday. It ran an hour and a half, which is a little longer than most of those earnings calls. But we did get quite a few nuggets specifically related to the streaming side, one, as you mentioned previously, the company weighing that free ad-supported option to draw in those cost-conscious consumers. We've seen that across the board with a lot of the streaming competitors as subscriber numbers slow.

The company also confirmed prior reports that it will be combining HBO Max with Discovery+, slated to launch next summer. In the interim, the two platforms will share content. But in terms of that content and what we can expect moving forward, CEO David Zaslav made a big point that he doesn't see any economic upside to direct-to-streaming films, which is largely why the company did decide to scrap "Batgirl." That film, nearly complete, A-list cast-- Michael Keaton coming back to play Batman, cost the studio between 70 million to $90 million to produce, and it's just not going to air-- Zaslav really going all-in on the theatrical.

He added that he has a 10-year focused plan when it comes to those DC franchises. We know the DC Universe largely lags the Marvel universe. So perhaps he wants to try and even that out a bit.

And he said that this decision was largely a strategic shift and emphasized that he's not afraid of spending any more money when it comes to increased content. He said that's going to be key moving forward if you want to forge ahead in the streaming wars and reduce that churn-- so not afraid to spend the money and really not afraid to lean on the theatrical, so some interesting tidbits there.

- Interesting indeed, Ali Canal. Appreciate that rapid-fire analysis. Julie, let's talk a little more about this one because you're getting the sense, right out of the gate, David Zaslav is in the mindset of running a profitable media enterprise that is looking to pay down large sums of debt. I believe their debt coming out of this quarter was over $53 billion.

Now, they don't have any-- they talked about this on the call last Night-- They don't have any maturities, really, of any substance, until 2024. That's a good thing. But, still, those debt maturities are gonna come due. And in order to pay them, you're gonna have to run a business that is actually making money.

- Yes. And we might have to wait a little bit to see how this movie is-- to use a streaming fund-- is gonna work out, right? Wells Fargo analysts, for example, say there are a lot of postmerger growing pains, that the assets are great, but the risks and capital structure-- to your point about the debt-- create a greater range of outcomes.

So it feels messy right now because it is messy for right now in this transition period. And I think, you know, we don't know how solid the streaming product that comes out all of this is gonna be, how appealing it is gonna be to viewers in what is this very competitive landscape. So there's-- I'm definitely a wait-and-see on what's gonna happen with this. But it's kind of an interesting ride to watch it all go on.

- And what is also unclear here, Julie, I would say, is, what does this do culturally to the teams inside of this company? Warner Brothers, these are very creative folks at this company. Can they continue to be as creative as they have been in recent years in this type of environment when you fear just losing your job coming out of nowhere?

- Yeah, well, I don't know. I mean, there's already been so much turnover here. I don't know at what point-- at some point, do they get to stability-- Zaslav has his teams in place that he wants in place, and that's kind of it? You know, this feels like he was putting his stamp on it, and then maybe he's gonna take a step back and let them do their thing. But that doesn't seem to be happening quite yet, perhaps.

- You know who's having a good day today? The folks at AT&T, because they don't have to deal with any of this stuff anymore. They handed off this mess. See you later.

- They weren't having such a good day, though, after-- the earnings for some--

- That is also true.

- --telcos were not fantastic.