Warner Bros. Discovery (WBD -1.50%) and Paramount Global (PARA -1.93%) are two of the largest media companies in the world, operating movie studios and linear TV networks that generate billions in revenue. In recent years, the two entertainment companies moved into the streaming space, where competition has gotten more intense and growth harder to come by. With this in mind, let's explore how the companies are faring, and which is the better buy.
Warner Bros. Discovery is focused on owning the full streaming stack
Warner Bros. Discovery has been very vocal about its plans to play in several areas of the streaming market. The company currently operates subscription video-on-demand services HBO Max and Discovery+, which will soon merge to form an as-yet-unnamed service offering movies, TV dramas, nature, programming, and reality shows. Warner Bros. Discovery has indicated that the merged platform will be available as an ad-free subscription video-on-demand (SVOD) package, as well as a lower-cost advertising-based video on demand (AVOD) tier.
Warner Bros. Discovery also plans to introduce a free ad-supported television (FAST) service sometime in 2023, notably distinguishing itself from other major streaming players such as Netflix and Walt Disney, which don't have such an offering.
Speaking about the FAST plans, Warner Bros. Discovery CEO David Zaslav suggested during the company's fiscal 2022 fourth-quarter earnings call that the organization is in a unique position to capitalize upon.
"[W]e have the largest TV and motion picture library in the world," he said. "And we can create a Tubi or a Pluto without buying content from anybody, by just being able to put it on ourselves."
Paramount has taken the time to find its feet in streaming
Based on user numbers, investors could be forgiven for thinking that Paramount Global is relatively new to the streaming space. In fact, the company has been in the SVOD arena since 2014, when it launched the first iteration of CBS All-Access (later rebranded Paramount+). Indeed, the company had a five-year head start on Walt Disney's flagship Disney+. However, Paramount+ has 77 million paying customers, while Disney+ has just shy of 162 million.
Paramount Global has been clear in its plans to boost its SVOD subscriber numbers, announcing a handful of strategies to achieve that goal.
In a move that somewhat mirrors Warner Bros. Discovery's HBO Max-Discovery+ tie-up, Paramount Global recently opted to bring content from its premium Showtime brand over to Paramount+. Additionally, the company intends to run some of its Paramount+ shows on the cable version of Showtime, thereby further blurring the line between its streaming and linear TV offerings.
When talking about Paramount Global, investors should also pay attention to its recent success at the box office, and how that also feeds into the company's plans to boost its SVOD platform.
Last year, Paramount Global said Paramount+ will become the de facto streaming home for movies from Paramount Pictures, beginning in 2024. While there's still some time before the plan will go into effect, for stakeholders, there have been some high-profile box office hits that have made the transition over to Paramount+, as well as signs are that it's working out well for Paramount+.
Top Gun: Maverick -- a movie that made close to $1.5 billion at the global box office -- became the most-streamed film on Paramount+ within days of arriving on the platform. The release was so successful that Paramount Global cites the movie as helping it add almost 10 million Paramount+ subscribers during its fourth quarter of 2022.
The risk of being in a hits-driven business
By pulling content together from disparate services, both Warner Bros. Discovery and Paramount Global are seeking to take full advantage of the streaming trend, though it's unclear which company will have the most success over the long term. Warner Bros.
Discovery's push to cover all tiers of streaming certainly has its advantages, but the industry has matured rapidly, so the company may not find it easy to succeed in all areas.
Likewise, Paramount Global's pitch to cross-pollinate its Paramount+ and Showtime programming and the tying up of blockbuster streaming rights are all smart moves, but it's far from the only streamer with prestige shows and big movies.
Despite the uncertainties, both Warner Bros. Discovery and Paramount Global do have some strong strategies at hand. For those watching the market, it will be worth seeing what each company says about their respective approaches during their next quarterly earnings calls, and indeed, whether they've got anything else up their sleeves.
