In the world of subscription video on demand (SVOD), it's been a tough year -- and especially for Warner Bros. Discovery (WBD -0.35%). While Netflix's share price is down 43% from its peak in 2022 and Walt Disney has seen its shares slip about 40%, Warner Bros. Discovery stock has fallen 65%.

The COVID-19 pandemic drove an inordinate number of sign-ups for the streaming industry. Indeed, Warner Bros. Discovery grew its HBO and HBO Max subscriber base by over 35% between Q1 2020 and Q4 2021.

But now with the world more open, inflation biting, and concerns about a recession on the horizon, it's perhaps understandable why some are cautious about Warner Bros. Discovery stock. Nonetheless, they may be missing some key things about the company's strategy.

A lean, mean content machine

When talking about Warner Bros. Discovery this year, one of the constant themes has been CEO David Zaslav's push to save money. In its current iteration, the company was formed from the combination of WarnerMedia and Discovery, and closed in April 2022. In the lead-up to the merger, Zaslav (then incoming CEO) was vocal about his ambition to save the company $3 billion a year in operating costs.

In the months that followed the merger, Warner Bros. Discovery hit the headlines for axing staff and chopping projects. This was most notoriously done with DC superhero movie Batgirl, which had been set to go directly to HBO Max but didn't even make it out of the edit suite.

The company has also been removing content that had been hosted on HBO Max for some time, including movies like American Pickle and The Witches, along with shows like At Home with Amy Sedaris and Vinyl. More recently, the company stripped out high-profile series like The Nevers and Westworld.

There has been much speculation about why Warner Bros. Discovery has taken such an approach to its content catalog in 2022. Many have suggested that by shutting down almost-complete movies and shows, the media company was able to leverage those projects as tax write-offs. Indeed, the company said in October 2022 that it expected to book $2.5 billion in content-related write-downs -- a figure that was recently revised to as much as $3.5 billion. But that doesn't account for the shelving of previously distributed content.

Building a FAST service with existing programming

While SVOD platforms ostensibly popularized the cord-cutting movement, free ad-supported streaming TV (FAST) services such as Roku's Roku Channel and Paramount Global's Pluto TV have also gained a foothold in recent years. According to a second-quarter 2022 study by Hub Entertainment Research, 55% of U.S. consumers are users of at least one FAST platform. That figure was up from 46% in the fourth quarter of 2021.

The FAST trend hasn't gone unnoticed by Zaslav. The executive noted on the company's last earnings call that it intends to launch a FAST competitor of its own in 2023. "As a company with the largest film and TV library in the industry, we have a unique opportunity to increase our addressable market and drive real value, and we plan to move quickly," said Zaslav.

While Warner Bros. Discovery has yet to say just what will be available on its FAST platform, Zaslav is clear that such an extensive archive of programming will give the company a competitive edge:

[W]e have the ability on the FAST side to build a service without buying content. Most of the players in that space are out buying content and then looking to sell that content and ... get a return on that content based on what they spent on it.

While it would be speculative to suggest content pulled from HBO Max will wind its way to Warner Bros. Discovery's FAST offering, Zaslav seems to suggest it's at least a possibility.

[T]here's always a huge number of people that do not want to pay. And we'll be able to have them spending time with us, we think, with an economic model, that's much [more advantageous] versus our peers. And then as we learn more, we can move [amortized] content through that ecosystem.

Warner Bros. Discovery is thinking about ways to monetize content that's not a fit for SVOD, and that's surely intriguing. Of course, should the company's FAST platform carry former HBO Max stalwarts, it could risk undermining that brand's cache. But if Warner Bros. Discovery can draw in plenty of fresh ad dollars from it, it may well be worth the risk.