Warner Bros. Discovery CFO Isn’t Sure Bundling Is ‘Endgame’ for Streaming, But ‘It’s Going to Play a Very Important Role’

Warner Bros. Discovery chief financial officer Gunnar Wiedenfels believes streaming bundles will play a “very important role” in alleviating consumer frustration moving forward.

Still, he declined to say whether it would be the “endgame” when asked during J.P. Morgan’s 2024 Global, Technology, Media and Communications Conference on Wednesday.

“I have these conversations every day with friends and family, professional contacts. It’s frustrating. You don’t know where to find what you’re looking for. Then, if you’re lucky enough to know where it is, you got to find out or remember whether you have a subscription or not, then you got to key in your password. So not a great experience, kind of contrary to what everybody thought initially, right?” the executive said. “So, I do think that that bundling is going to play a very important role. I don’t know if it’s the endgame, but it’s going to play a very important role.”

Wiedenfels’ comments come after Max recently partnered with Disney+ and Hulu on a new bundle that will launch this summer. He called it a “top to bottom fantastic deal” from both a consumer value proposition perspective, as well as an economic one that he believes will boost WBD’s domestic average revenue per user.

“Typically, the way you rationalize a bundle is we’ll have an attractive consumer price point and we’ll get a churn benefit and we might save some on the marketing and we pay for that with a lower ARPU number. This one is different,” the executive explained. “I have no doubt we’re gonna see great churn benefits. I have no doubt we’re going to see great marketing efficiencies. And I have no doubt that we’re going to generate an ARPU that’s above our domestic overall average.”

In the first quarter of 2024, WBD’s direct to consumer business reported a global ARPU of $7.83, a domestic ARPU of $11.72 and an international ARPU of $3.75.

In addition to bundling, Wiedenfels spoke about Max’s upcoming password sharing crackdown, emphasizing that it would be a “meaningful” but “significantly smaller opportunity” than Netflix’s paid sharing initiative.

He also reiterated management’s previous remarks on the ongoing negotiations with the NBA, touting WBD’s “great partnership” with the league.

“We value the product and we’re very hopeful that we’re going to be able to find a solution here that’s mutually beneficial to both sides,” Wiedenfels added. “We do have a contractual matching right and that’s an important part of our ongoing contractual relationship. But that’s about as much as I want to say about the NBA.”

Additionally, he addressed the recent challenges for their studios, which reported a 70% drop in profit during the latest quarter.

“I think we have under-earned over the past few years in the studio … so I think there is a real value opportunity there for us,” he said. “We’ve seen lower EBITDA last year and slightly less financial success on the film side which was very much driven by a very different strategy. You got to remember a lot of what hit the screens in 2023 was still developed with an eye towards streaming first and just a certain number of films, regardless of what was available and what the quality was.”

In June 2022, Warner appointed Michael De Luca and Pamela Abdy to helm its studios division. On Wednesday, Wiedenfels argued that they are taking a “very different approach” compared to previous strategy.

“Gradually, as we move through this year and then really into next year, we’re going to see their products, their choices, and we’re going to increasingly see their handwriting on the films and I think David has selected a great leadership team for the studio from a purely financial perspective,” he said. “What I’ve got a lot of confidence in is our ability to make sure that in success, we drive better results, and in the inevitable failures, we limit our losses … I really think that a year from now, two years from now, the studio is going to operate at a very, very different level of profitability.”

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