Warner Bros. Discovery (WBD -2.17%) has announced it is ending both the development and production of multiple HBO Max original shows made across multiple European countries, including Denmark, Sweden, Norway, and Turkey. The company has also said it will remove some existing content from those territories, allowing it to license the programming to other providers.
Warner Bros. Discovery CEO David Zaslav recently spoke with reporters about changes in the firm's content strategy, suggesting "it's not about how much, it's about how good." Zaslav noted the streaming space is experiencing "turmoil", but posited there could also be a "lot of opportunity." With this in mind, could the chief executive conclude that operating HBO Max in nascent markets just isn't worth it?
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Trying times for streamers
Zaslav took up the CEO role following the merger of WarnerMedia and Discovery earlier this year. He came in with a clear plan to save the combined company $3 to $4 billion annually. Indeed, in one of his first acts, Zaslav ordered the closure of CNN+, the streaming-only service launched mere weeks prior.
As Zaslav noted, these are unsteady times for the streaming industry. Netflix has lost a significant number of subscribers, and its share price fell some 71% in the first half of 2022. Meanwhile, Disney's stock has dipped over recent months as blockbuster Disney+ subscriber growth has petered out.
Of course, all of this comes as inflation continues to rise across multiple global economies, and Russia's invasion of Ukraine has dramatically increased energy costs for Europeans. Consumers now have a lot to think about when it comes to where they spend their money.
Creating localized markets is cost-intensive
While the streaming industry pulls a lot of its DNA from its cable forebears, the flexibility for streamers has always been that they're not tied to the infrastructure that is piped into a person's home: If you have an internet connection, you can pick and choose what you subscribe to. And thanks to this model, expanding into global markets presents fewer barriers for streaming operators -- something both Netflix and Disney+ have demonstrated, with more than 220 million subscribers and 87 million, respectively.
However, as both Netflix and Disney+ have demonstrated, localized content tailored to regional viewers is key to that success. But that's something that costs money, which can be hard to justify in the current climate, especially if subscriber numbers are peeling off.
Zaslov may have more changes in mind
Needless to say, Zaslav is reading the tea leaves and deciding that it's important to make bold choices now if Warner Bros. Discovery is going to take advantage of the opportunity he sees coming. With this in mind, it's feasible to suggest that slashing HBO Max originals in non-English language markets could be the tip of what's coming.
Looking back at Zaslav's approach to CNN+, it's worth noting that HBO Max has only operated in Sweden, Denmark, Norway, and Finland since October 2021. Some of the territories that Warner Bros. Discovery is pulling back investment in have mutually intelligible languages, so it's feasible the company could consolidate some of those markets. For example, while culturally distinctive, Swedes and Norwegians can converse easily enough, and TV networks have historically carried cross-border shows and movies.
As the bear market continues, investors would do well to watch Warner Bros. Discovery's approach to its nascent HBO Max territories and see whether the firm does decide to merge such operations, or possibly sunset them entirely. Either way, with less content to appeal to regional subscribers, Zaslav will surely understand that the quality versus quantity argument only holds up if customers still have enough to binge.
