Warner Bros. Discovery Considering Ad-Supported Streaming Plan

Warner Bros. Discovery Inc. is exploring launching a free, ad-supported streaming service, its chief executive said, the latest effort by a streaming giant to reach a broader audience as the competition for users intensifies.

The Wall Street Journal reports the new company, the result of Discovery’s merger with AT&T Inc.’s WarnerMedia earlier this year, will first focus on a previously announced plan to combine its two main streaming services, HBO Max and Discovery+, executives said during a call with investors. The combined subscription platform will be rolled out starting in the U.S. next summer, said JB Perrette, the company’s CEO of global streaming.

Once that service has been launched, the company sees potential for a free, ad-supported offering, Chief Executive David Zaslav said. The free service would cater to cost-conscious consumers and serve “as an entry point to our premium service,” he said.

David Zaslav

The announcement came as Warner Bros. Discovery reported its first quarterly earnings as a combined entity, swinging to a loss due to merger-related charges and warning investors that an advertising slowdown had led it to cut its outlook for this year and next.

As the number of streaming options has exploded in the past three years, many companies are looking to offer lower-cost versions to their services in an effort to boost their user base. The industry’s two biggest players, Netflix Inc. and Walt Disney Co.’s Disney+, are both working on launching lower-priced, ad-supported versions of their platforms.

Zaslav has acted swiftly since taking over in April. That included pulling the plug on CNN+ days into the job—and just weeks after the streaming service’s launch—as well as canceling movies and shows that had been approved by previous leadership. The company earlier this week decided not to release the superhero movie “Batgirl” despite the fact that it had already been filmed.

Zaslav said the company’s new approach was to put more emphasis on content quality. “It’s not about how much,” he said. “It’s about how good.”

Warner Bros. Discovery—whose properties include the Warner Bros. movie studio and the cable channels TNT, Food Network and HGTV in addition to HBO and CNN—swung to a $3.42 billion loss in the second quarter, which it said was partly due to charges related to the merger. Revenue came in at roughly $9.83 billion.

Warner Bros. Discovery said it had 92.1 million subscribers across its streaming platforms, up about 1.7 million from the first quarter. That compares with 220.7 million for Netflix and 205.6 million for Disney, whose services include Disney+, Hulu and ESPN+, according to the companies’ most recently released figures.

Chips, Joanna Gaines

Meanwhile, Chip and Joanna Gaines have made a deal with HBO Max and soon will have content available on the streaming giant.

The former HGTV star couple, known for their home improvement shows and their growing Magnolia Network, are expanding into the streaming universe with HBO Max, Variety reported on Thursday.

Last year, the Gaineses launched their Magnolia streaming channel in partnership with Discovery.

After that launch, the Magnolia Network became one of the top 25 basic cable networks. The network also received five Emmy nominations.

Then, Discovery merged with WarnerMedia. So the new decision to put some of the Gaines content on HBO Max is an early attempt to join WarnerMedia and Discovery content.