While the number of streaming video options seems to continue to expand every year, consumers will have at least one fewer streamer to scroll through next summer. Warner Bros. Discovery (WBD -2.05%) will merge Discovery+ and HBO Max starting next year, integrating the content from both services into a single platform.

Walt Disney (DIS -0.20%) may follow. It has the right to acquire the remaining 30% ownership of Hulu from Comcast (CMCSA 1.52%) starting in 2024, or Comcast may force a sale to Disney. Activist investor Dan Loeb is pushing Disney to acquire Comcast's stake even sooner. With 100% ownership of Hulu, Disney could move to integrate the service with Disney+.

As such, Disney investors need to pay attention to how things play out at Warner Bros. Discovery.

Why combining Disney+ and Hulu makes sense

While Disney has done a great job of growing Disney+ in the United States, its international subscriber base is growing even faster. Over the last six months, Disney added 1.6 million subscribers in the U.S. and Canada, and 8.1 million subscribers internationally.

While CFO Christine McCarthy expects strong domestic net additions for the service in the current quarter, growth is still strongly driven by the international product.

One thing that makes the international product different from the domestic product is the inclusion of the Star tile in most international markets. Star is the general entertainment brand for Disney outside of the U.S., similar to Hulu domestically.

Recently, Disney's been pushing more general entertainment content to Disney+ instead of Hulu. For example, Dancing With the Stars will become a Disney+ exclusive this year. That indicates that it sees value in the broader category as part of Disney+, and the Star tile may be getting a lot of playback in international markets.

Disney's already capitalizing on the desire for content from both Disney+ and Hulu and its impact on churn. It pushes consumers to the Disney bundle, with its new pricing giving consumers even more incentive to bundle. It's also including a new bundle of both Disney+ and Hulu (both ad-supported) when it rolls out the new pricing in December.

But a bundle may not be as effective as a fully integrated single service. Removing friction points could lead to even greater subscriber retention, which is increasingly important as Disney's subscriber base expands.

Coming attractions

Warner Bros. Discovery's plans to combine HBO Max and Discovery+ provides a preview of the challenges ahead for Disney if it goes through with plans to integrate.

The company is combining two streaming services with two different technology stacks. Each service has its strengths and weaknesses when it comes to search and discoverability and other features impacting engagement. The goal is to take the strengths of both and offset the weaknesses.

There's also the branding challenge. HBO is an extremely strong brand that stands for something entirely different from what Discovery offers. It's prestige scripted programming. Disney also has a strong brand, and integrating Hulu's content may not always fit under that brand. And the brand Hulu's built (with its Emmy-award-winning series) shouldn't be discounted either.

Warner Bros. Discovery's management suggested it may ditch the HBO brand for the name of its streaming service without ditching the brand entirely. It's a fine line for the company to follow.

Management expects to generate efficiencies in the integration, specifically around marketing. With one combined service, Warner Bros. Discovery may be able to allocate content spending across its unscripted (Discovery) content and prestige (HBO) content more efficiently. CEO David Zaslav previously mentioned that efficient content spending is a key piece of his streaming strategy.

Those factors will be important for Disney investors to watch. In particular, Hulu is set to lose key content rights from Comcast, which will retain them for its own streaming service, Peacock. The integration of Hulu with Disney+ could stem Hulu subscriber loss without needing to immediately replace the Comcast content.

Warner Bros. Discovery will provide further details of its integration plans later this year at an investor day. While it'll be essential for its own investors to review, Disney investors will want to watch it as well.