In this podcast, Motley Fool senior analyst Jason Moser discusses:
- How Warner Bros. Discovery CEO David Zaslav's focus on profitability could pay off.
- The company's underrated library of content.
- The rise of FAST (free ad-supported TV).
Motley Fool Chief Investment Officer Andy Cross talks with Airbnb co-founder Nathan Blecharczyk about the latest improvements for the platform.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on Dec. 05, 2022.
Chris Hill: We've got a little shakeup in the video streaming wars. Motley Fool Money starts now. I'm Chris Hill. Joining me today, Motley Fool Senior Analyst Jason Moser. Happy Monday?
Jason Moser: Happy Monday indeed.
Chris Hill: Executives at Warner Brothers Discovery are planning to merge their discovery plus streaming service with HBO Max. They are reportedly close to a new name for this combined service, and the name that is being reported is simply Max, which is I guess better than just Plus. Interface is reported they're going to have individual tiles for HBO discovery, Warner Brothers content and DC Comics all there and the main hub for the service. This story Jason, reminds me that I think we all underestimate slightly, or at least don't pay as much attention as maybe we should to Warner Brothers Discovery when we're talking about the streaming services.
Jason Moser: I think that's a good point. Number 1, I really do appreciate the fact that they're not tilting toward something like a plus, it feels that has just been used to death. Something like a Max, I think makes a lot of sense. It takes the focus away from HBO, which has its own property, its own brand, and it's a pretty impressive landscape. When you look at today's HBO Max app, if I open that app over a phone, and I'm looking at all of these properties, they have HBO, DC, Max Originals, TCM, Adult Swim, Studio Ghibli, Cartoon Network or CN's Sesame Workshop, Looney Tunes, Cartoon ITO. They've got a lot of stuff here. Now we're going to see them bringing the discovery properties in there as well. This is just a very valuable property.
Obviously, it's not worked out as an investment on its own so far. I think that partly has to do with the state of the business very much in transition and reestablishing itself and coming up with a new direction. Also, it's a very competitive space, and streaming. We've given streaming. Streaming is getting so much attention in the financial media these days, because of Netflix, because of Disney and Disney Plus. It's not the most profitable market opportunity out there right now, it's still a market opportunity that's finding its way and evolving. But I like the way that CEO David Zaslav is looking at this business. It's just a tremendous amount of intellectual property that is within that one company, and you have so many different properties, so many different brands underneath that umbrella. I think this has a chance.
In a space I think we're going to continue to see more and more consolidation. I think this is going to be one of the consolidators. This is going to be one where probably a few more brands end up residing under that umbrella as time goes on. Ultimately, I feel it'll work out well for them, but they've got their work cut out for them as well. It is a business, like I said, still trying to find its way, ultimately focusing less on just growing that subscriber base and more on actual profitability. That is really the North Star for this business going forward, it's not just about subscribers at any cost. I think we're seeing that mindset play out beyond just Warner Brothers. I think you're seeing that same language at Disney and Netflix now as they try to capitalize on these new opportunities.
Chris Hill: But isn't there total subscriber base somewhere in the neighborhood of 100 million?
Jason Moser: It is. It's getting up there. They just recently announced their most recent quarterly call in the beginning of November, they had added three million direct-to-consumer subscribers. That is somewhere in the neighborhood of 100 million when you put all of the properties together, and that is a big subscriber base. When you think about something like your Netflix isn't Disney's that are 235 million, that's one thing. But then you've got this next level where you see the HBO Max brand come into play here because you compare that to something like NBC's Peacock. At the end of their most recent quarter, they had 15 million paying subscribers, along with another 14 million bundled and free users. Let's just call it 30 million subscribers there.
I think what is a pretty well-established brand in that Peacock brand and the NBC content, to see HBO Max with that size of subscriber base, that's what you want, you want the subscribers. Then ultimately what you got to do is, you got to figure out how to keep them. We're seeing obviously companies like Netflix introducing the ad-supported tier. We're going to see here in the very near future also, Warner Brothers will be introducing their own fast offering or free Ad supported TV. You can compare that to something like a freebie on Amazon or Tubi or whatever. But all all together, the subscriber base is what you ultimately need to get to that profitability, and then just take advantage of your scale. I think those are two big advantages that Warner Brothers has, in this case, is they've got the subscriber base, and they've got the properties and the content, so they really should be able to take advantage of this.
It'll just take some time. I think really ultimately getting everybody on the same page in something that they mentioned in the most recent call to beyond just the strategic priorities of content and maximizing the monetization of that content. They're ultimately trying to operate as one company. I think right now what they're witnessing is a very siloed situation, with all of these different brands as businesses come together here over the past several years, that siloing, it's very inefficient. I think what they're trying to really do is eliminate a lot of the redundancies, trying to right-size the business, and ultimately operate as they say, as one company that I think will help them in getting to that profitability goal sooner rather than later.
Chris Hill: Zaslav certainly is not letting any moss grow under his feet. You think about it, he comes onto the job, very quickly kills the CNN Plus app, and says, that thing didn't start under me, I'm not going to spend that money, tier point about profitability. I am reminded of the lead up to the launch of Disney Plus, which launched in late 2019. I think three years after the original target date, I think the differential target date was 2016, maybe it was 2017, but it got delayed a couple of times. We said, leading up to that, boy, they better get this right. They really better nail this interface because they've been delaying this over and over again. I think not that Warner Brothers Discovery has had the same number of delays, but I think as you said, they got their work cut out for them. It's a real great opportunity, because if they nailed the interface right out of the gate, if they can really delight the existing subscribers they have with a new interface of a new merged combined service, then I think it makes it a lot easier for them to go out and find new subscribers, hopefully in a cost-conscious way.
Jason Moser: I do agree. I think that what they have today, the interface is fairly intuitive, easy to use, you can get to where you want to go, I think pretty quickly. Again, I like the idea that they're steering the branding away from involving HBO. Because I think one thing that they've noticed, HBO for so long, that has been the pinnacle of original content, they just really have knocked it out of the preferred for decades. When you have this HBO Max property that has all of this content underneath it, that seemingly isn't related to HBO whatsoever, it becomes very confusing. You start to wonder, is this really what I'm looking for. I think being able to give it its own identity and then touting the originality of each brand underneath that umbrella makes a lot of sense. Zaslav said on the call here recently too in regard to subscribers. He said that, he called it this grand experiment in chasing subscribers at any cost.
Essentially referring to, we're not going to worry about profitability, we're just going to do whatever we can to get subscribers. Typically, the first thing you do is you just produce mountains and mountains of content, and you pay exorbitant sums of money for that content. We've seen obviously companies like Netflix and Disney that are throwing tens of billions of dollars every year at this content. That doesn't look like it's going to abate anytime soon. He feels like, listen, that was the grand experiment, but that's not the way this needs to be done, this is over. It's more about deliberate content, identifying with your brands, the audience, the audience's desire for whatever those brands may be, and focusing on that profitability, not just chasing subscribers at any cost. With Disney and Netflix, I think they recognize that.
That's why they're going to those ad-supported models because they recognize there's this big opportunity out there to capture more viewers and actually do it in a profitable fashion, ultimately, it's going to take some time, but I do think that Zaslav, he has his mind at the right place regarding this. It's going to be interesting to see, I think, how this fast offering that supposed to launch here by next year, that free ad-supported TV. I think that could be another meaningful driver, because as we've seen over the past several quarters with companies like The Trade Desk, they talk about that connected TV and that ad-supported streaming market is really taking hold, gaining a lot of traction. One of the advantages with companies like Warner Brothers Discovery is they have a ton of IP, and they can really exploit. A lot of that IP is timeless.
If you look at things like HGTV and Food Network, for example, you produce a season of those shows and they're good 10 years later. Something very similar to what Disney benefits from. I think Netflix to an extent as well. Certainly, HBO has just benefited from that through the years also. I like the idea of really focusing down on profitability. Understand if you have the right content, the viewers will come, and you used the word delighting, if you can keep on bringing good content then they're probably going to want to stay. It's going to give you a little pricing power and then the other point they made too, is that they haven't raised prices over the course of last three years, I think he said. As they add more to this offering, it's going to give them a little wiggle room to raise those prices incrementally over time, which I think will make a big difference.
Chris Hill: Jason Moser, thanks for being here.
Jason Moser: Thank you.
Chris Hill: Despite all the rolling lockdowns in China, travel is bouncing back in the region. Motley Fool Chief Investment Officer Andy Cross caught up with Airbnb co-founder Nate Blecharczyk to talk about the latest improvements for the home-sharing platform and how Airbnb's growth story can continue.
Andy Cross: Nate, you're actually a host yourself on Airbnb. I think I have that right; you host yourself on Airbnb.
Nate Blecharczyk: Yes.
Andy Cross: Talk a little bit about how do you all decide to think about your feature set? Why did you? Was it to do a lot of customer research? Are you out there talking to hosts, are you using internal Airbnb employees like yourself to guide you on what features to add or not add to the site. Any insights on how the winter release came about and why you focus so much on things for the hosts.
Nate Blecharczyk: Well, really all of the above. I mean, specifically the winter release. It started with what are the macro trends that are happening? If you look back at all our releases over the last two years, we do one every six months, it very much starts with what are the trends that are happening out there right now? That's because we've gone through a very tumultuous period where a lot of things were changing very quickly. As a company, we want to make sure we are really responsive of what people needed in the moment. What people are going to need two years from now, very different from maybe what they needed during the pandemic. I think our development process has been very attuned to what are the trends? The trend right now is there's a lot of economic uncertainty, there's inflation, people are going to value extra income. That's the trend. We think hosting is the answer to that.
Now we want to answer the question, how do we get all those people who've been sitting on the sidelines? They're not yet hosts, they're not yet, maybe, guests, but in this case hosts. We went out and we did a lot of consumer research to study what are the concerns that people have? They're worried about, is my place good enough? They're worried about what's my first guest going to be like? What protections are in place? That then informed our feature set. As from my own personal hosting, I've been hosting for a long time now, so I'm no longer that perspective host. I'm the Superhost. But that's super valuable as we think about making the product better for our more experienced hosts. I used the product every day and I noticed a lot of little things that helped me create accountability with a team. Especially, again, going back to the fact that probably Joe, Brian, and I we've the only ones who've been here for 14 plus years. This consistency of thought that we bring in this obsession with the product and familiarity with the frontline products is very important for being a leader at the company.
Andy Cross: I know one of your experiences also is globally, and I think he ran the China business for a little bit. Maybe you are still tied to it. Talk a little bit about globally, are you seeing that things like the winter release or customer dynamics, hosting dynamics. What are some of the challenges that you might be seeing outside of the United States that might be helped with something like the winter release? Are they different dynamics or is it the hosting concerns are pretty universal across the world?
Nate Blecharczyk: You mentioned China. China is a pretty unique place with their COVID strategy. Our focus in China these days is really just on outbound travel. We no longer are doing hosting inside of China. China's probably an outlier in terms of where they are travel-wise. But the rest of the world, I think, is increasingly in the same place. I think different countries were at different points in their COVID cycle. All countries aside, probably from China, have at this point, relaxed restrictions, Asia being the most recent region to really open up over the last several months. With that came a rebound to travel, so travel, I think has been very strong. Once economies have opened up, there's a lot of pent-up demand. There's also this remote work trend that is very much present all around the world, which effectively allows people to travel longer and more often. Now there's inflation and there is economic uncertainty. I think these trends are really global ones at this point. We've seen our business thriving as a result, all around the world.
Andy Cross: Looking beyond the winter release, what do you see as just the biggest opportunities; the really untapped opportunities for Airbnb that excite you?
Nate Blecharczyk: Well, I think there's still so much opportunity just within our core business. Again, the number that keeps me super, super excited is like this whole business has been basically built with just 4 million hosts on the platform. That's a small number in the scheme of the total population. To think that 60 million visitors have come to that hosting page, at least considering hosting, I think there's a future where there's millions and millions, multiples more hosts. I think that's a huge opportunity because that's just our core business.
Andy Cross: Is that mostly an accommodation do think, Nate, or is it start to expand into other areas? I know you've talked about experiences and things.
Nate Blecharczyk: Accommodations is the majority of our revenue by far, currently, so I think that alone is exciting. That being said, when I think about hosting and the potential for our hosts, it goes beyond just providing accommodation. We've obviously experimented a little bit with this with experiences. It's a new way in which people can offer their time and expertise as effectively small business. With our winter release, the fact that we're pairing you with what we call an ambassador, but it's effectively a Superhost, well, those ambassadors are being compensated for their time. When a new perspective host becomes successful, gets there first booking, that ambassador is actually making income from Airbnb.
Yet another way in which a host can, in this case, share their expertise and their perspective and monetize it. I think there's so many other ways in the context of the travel that our hosts can offer their hospitality, their expertise, and monetize it. I'm personally pretty excited to explore those other possibilities. I mean, those possibilities are very nascent at this point. They're not going to drive meaningful revenue in the short-term. But when you think about the next 10 years and where this goes, I think it's hugely exciting. I'm also just very excited about living, working, and traveling, all converging the fact that people do have this new mobility and are untethered.
I think Airbnb is experiencing this trend currently through the trend of long-term stays; stays of 28 days or longer being booked on Airbnb. It's 20 percent of our nights booked at 20 days or longer. But I think it really starts to open up the possibility of what if Airbnb is a site you go to, not just for traveling, but for living your life. Whether it's your accommodation for months at a time or longer, or just new ways of experiencing your hometown, connecting with other people in your town. We see this with experiences. In some cities, the majority of the people booking experiences are locals just interested in meeting other locals. I think the potential for Airbnb does expand beyond travel into some of these other big spaces like real estate and such.
Chris Hill: As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.
