Streaming could be headed towards consolidation
The forthcoming rollup of Discovery+ and HBO Max could herald a new stage in the streaming era: the beginning wave of consolidation as streaming settles into its next iteration.
Why it matters: Once the rollup happens, there will be three big players in Netflix, Disney+ and the augmented HBO Max/Discovery+.
- Along with those three, Amazon and Apple qualify as major players if only because they have the financial might to outspend anyone.
- But for smaller players like Peacock and Paramount+, this could force a rethinking of ambitions, as consumers are becoming more discerning about how many services they're willing to pay for.
Driving the news: Discovery finally made public what many had privately expected: Sometime after the merger with WarnerMedia goes through, Discovery+ and HBO Max will combine into one service.
- In the short term, the two will be bundled together, the same way that Disney offers a bundle of Disney+, Hulu and ESPN+.
- But on Monday, Discovery CFO Gunnar Wiedenfels said at the Deutsche Bank Annual Media, Internet & Telecom Conference the long-term plan is to have "one very strong, combined, direct-to-consumer product and platform."
By the numbers: Combining the subscribers of HBO Max and Discovery+ could put Warner Bros. Discovery close to 100 million subscribers.
- Netflix and Disney+ have more than 100 million each, with Netflix topping 200 million.
- On the other end, Peacock only has about 9 million paying customers and Paramount+ has 32.8 million (while Paramount Global collectively has more than 50 million streaming subscribers).
What they're saying: "Neither NBCU, nor Paramount, have sufficient humility to acknowledge that they need help, and I don't expect either to even consider a combination," Wedbush analyst Michael Pachter tells Axios. "Both are likely to remain in a muddled state until losses start mounting, with Paramount+ probably first to have growing pains.
"Be smart: Comcast and Paramount Global already have a streaming partnership overseas with SkyShowtime.
- Paramount plans to invest more heavily in Paramount+ content, which is coming off its best quarter of growth in its short history. That was immediately followed by Paramount's stock going into the tank, as many investors are now wary of the high cost of streaming.
The bottom line: Try as they might, the grim reaper is probably coming for one or two streaming services within the next 18 months. Warner Bros. Discovery is making sure it's not coming for them.