‘House of the Dragon’ series logo displayed on a phone screen and HBO Max website are seen in this illustration photo taken on August 16, 2022.
Jakub Porzycki | Nurphoto | Getty Images
Streaming service subscriber growth may be slowing, but that doesn’t mean prices won’t keep rising.
HBO Max and Discovery+, Warner Bros. Discovery’s two flagship streaming services, are “fundamentally underpriced,” Chief Financial Officer Gunnar Wiedenfels said during the Goldman Sachs Communacopia Tech Conference on Tuesday.
related investing news
Wiedenfels suggested the company had ample room to raise prices given the strength of content on the services, which will be merged into one next year. Last month, Warner Bros. Discovery said it planned to launch a combined HBO Max-Discovery+ service in the U.S. in mid-2023, with international markets to follow.
While Warner Bros. Discovery hasn’t announced how it will price a combined service, Wiedenfels’ comments suggest the company may use the merging as a chance to raise prices. HBO Max is currently $14.99 per month without ads and $9.99 per month with commercials. Discovery+ is $6.99 per month without ads and $4.99 per month with commercials.
Wiedenfels noted HBO Max won more Emmys (38) this week than any other streaming service. HBO’s “The White Lotus” snared the most awards during the prime-time ceremony with five, including Outstanding Limited Series. Warner Bros. Discovery’s strategy is to combine HBO’s award-winning programming with Discovery’s lighter reality content, which should reduce “churn,” or number of subscribers who cancel the service, Wiedenfels said.
Price hikes abound
Netflix is currently the most expensive major streaming service with a standard plan price of $15.49 per month. Disney announced price increases for Disney+, ESPN+ and Hulu last month, including bumping the price of Disney+ without ads from $7.99 per month to $10.99 per month.
Warner Bros. Discovery set new streaming subscriber targets last month, including 130 million global subscribers by 2025. The company also reaffirmed its expectation for its streaming business to break even by 2024 and yield $1 billion in profit by the end of 2025.
Warner Bros. Discovery isn’t chasing subscriber growth at all costs, said Wiedenfels. That change — to prioritize profitability over growth — allows the company more “pricing power” over its streaming businesses, he said.
“We’re not optimizing for subscribers,” said Wiedenfels, who called that type of strategy “old world streaming” thinking.
–CNBC’s Sarah Whitten contributed to this report.
WATCH: Warner Bros. Discovery punts two sequels as company looks to cut costs
