Benzinga - In the wake of Warner Bros. Discovery, Inc.'s (NASDAQ:WBD) Max streaming event held on Wednesday, an analyst at Needham weighed in on the competitive dynamics among three of the biggest players in the segment.
Takeaways From Max Event: Warner Bros.' execution is muddled, analyst Laura Martin said in a note. She noted that Netflix, Inc. (NASDAQ:NFLX) has a single streaming service aimed at everyone and Walt Disney Company (NYSE:DIS) has three services, each with a clear and complimentary target audience.
Warner Bros.' two streaming services, Discovery+ and Max, with the latter also including Discovery+ content, are not properly differentiated, the analyst said.
Max is priced similarly to HBO Max, starting at $10 per month despite all premium Discovery+ content included in it, as of May 23, Matin noted. "The sub-growth and financial impacts of this decision are both negative," she said.
Martin also said that content costs for Warner Bros. which was at $23 billion in 2021, will be higher in 2023 as well. The increase comes about as the company builds up its film slate to 20 films and launched new TV shows for Max.
The content cost is higher than Disney's content costs of $20 billion per year and Netflix's content spending of $17 billion per year, the analyst said.
Martin said she sees the deleting of the HBO name and keeping the Max name to be controversial as well as financially negative.
“‘Max’ means nothing (ie, requires more marketing spending) while ‘HBO’ spent hundreds of millions of dollars over decades to create a brand that meant best-in-class TV," Martin said.
And The Winner Is: Disney and Amazon, Inc. (NASDAQ:AMZN) Prime Video beat both Warner Bros. and Netflix, Martin said. This is due to the better OTT strategy and tactics, and deeper pockets of the former two, she added.
The Warner Bros. versus Netflix battle is a tight race as the latter is a single-line streaming business, with the focus serving as its advantages.
The analyst, however, added that Warner Bros. has a larger TV & film library, more diffuse revenue sources, and better IP and franchise relationships, such as JK Rowling, Batman, etc, she said.
Also, the company is newer to OTT and so its subscriber adds and DTC revenue growth should both be faster than Netflix's, she added.
Martin has a Hold rating on Warner Bros.
WBD stock rose 1.78% to $14.31 in premarket trading on Thursday, according to Benzinga Pro data.
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