1. DiscoWarner Is Real

In a move all the more stunning for the rapidity with which the deal went from rumor (Sunday) to reality (Monday), Discovery will merge with Warner Media. While Discovery CEO Dave Zaslav will run the new company, AT&T will still own 71% of it (or at least its shareholders will) so it remains to be seen how the power is ultimately structured, especially given all the personnel and other changes that (soon to be departing) Warner CEO Jason Kilar was making.

Why It Matters

The real news here is that the newly merged duo will provide strong competition for Disney and ultimate Netflix, creating a sort of “A League” of Flixes between the three companies.

“DiscoWarner” as The Information's Sahil Patel facetiously dubbed it, will have a wide range of programming from non-fiction (HGTV, DIscovery, Food Network) to news (CNN), sports (TNT and TBS) and quality scripted programming (HBO) that should put it at the front of most people’s “Top 3 streaming services” list.

There are still a whole lot of unanswered questions beyond the name of the new service, the most critical being how will the programming be priced and what will be included in each service?

Meaning mostly, will they do what Disney is doing and maintain separate HBO Max, CNN and Discovery+ apps, with a discount for bundling them together? Or will they combine everything into a single app along with a live feed of CNN? Or multiple options in between?

We will know soon enough.

As I’d noted in my OG write-up of this story, the biggest potential loser here is Netflix, as they still mostly only have scripted programming--no news, no sports--and that could make them expendable for many people.

Again, we’ll know soon enough, though Netflix, like Apple, is one of those companies where any whiff of negativity is met with angry reactions from fan folk so I’m not holding my breath waiting for rational discussion of their position in this new universe.

What You Need To Do About It

If you’re DiscoWarner, you have a bunch of “action items”—come up with a name for the new company as well as the combo app, if there will indeed be a combo app. 

You also need to figure out what to do with CNN.

 If that were up to me, I’d make it a separate app that gave you the network’s live feed, and include it in the ad-free version of HBO Max as well. Then I’d set to work on developing CNN regional and local sub-channels within the app, as local news is (a) getting decimated and needs some love, (b) is what keeps people from giving up traditional pay TV, and (c) is important to companies you consider your rivals. 

If you’re Apple or maybe even Alphabet, think about buying ViacomCBS and seeing what you can do with it to raise it from B-level status to become the fourth A-level Flix. I’d add Facebook to that list, but no one in any political party is going to let Facebook get away with anything that smacks of greater control of the media right now, so that’s sort of a no-starter.

If you’re one of the many industry types who exhibit NASCAR Blindness around Discovery and its programming (no one you know watches those shows so clearly no one else must either) it’s time to take off the goggles. There’s a reason Discovery+ is doing so well, and you and your media industry friends are but a small bubble.

2. Ad-Supported HBO Max Raises More Questions Than Answers

HBO Max announced its new ad-supported version this week. As expected, the service will cost $10/month and programming that was originally produced for HBO will not have any ads in it. 

Ad-supported Max is promising to have fewer ads than on any of its rivals, and rolled out some interesting non-traditional ad products: Brand Blocks (a brand owns a block of content), Pause Ads (thanks Hulu!) and Branded Discovery (talk about double meaning!)

Why It Matters

It was admittedly unfortunate timing for the announcement, given that no one knows what HBO Max is going to look like post-Discovery merger, but it was interesting to note that the same overall sense of confusion that marked the Max’s original debut was present at the ad-supported version’s launch as well.

To begin with (follow me here) it seems there won’t be ads on programming that originated on OG HBO, but shows like The Flight Attendant, which were developed for HBO Max, will actually have ads. 

What’s not clear is if that means that any series launched after May 2020 will be ad-supported, while those that were on air before the launch of Max would be ad-free, or if there will be a distinction between new HBO originals and new HBO Max originals, and if I can’t figure it out, consumers are bound to be even more confused.

There is one distinct penalty associated with ad-supported Max, and that’s the fact that first-run Warner Brothers movies won’t be available to that tier though given that the whole “same day live on streaming” program ends this December, it’s not a very onerous penalty.

I’m thinking that for a lot of people, myself included, the $5/month savings is going to prove attractive as they’re only there to watch HBO programming anyway and will never watch the rest of what’s on the app, which at present consists of lots of reruns and some live sporting events from TBS and TNT. (Okay, I actually do watch NBA games on TNT, but if you’ve ever had to sit through announcers babbling during time-outs, you’d rather have commercials.)

Given that it’s still unclear whether any new programming will be deemed “HBO worthy” or if all just goes into the ad-supported Max umbrella, that may not be a long-term decision for many of us, but for now, ad-supported Max is looking like a plan.

Then there’s the real elephant in the room, which is that no one knows what Max will look like a few months from now, whether it will feature CNN or Discovery programming and how much of either--a live feed? A recap reel? Select HGTV and Food Network shows, none at all, or the whole line-up? Will there be any sort of bundle? And if there is, how good a deal will it be?

For the ad community, there’s even more that’s unknown, specifically how an ad buy on HBO Max is going to play out post-merger, e.g., will there be any sort of synergy with Discovery, what does that look like and how much will it all cost?

What You Need To Do About It

If you’re HBO Max (and by extension the new management team) you need to figure out what your actual offering is going to be for Max and your other Flixes and then let both consumers and the ad community know about it. You’ve got a loyal audience but I’d say simplicity is key here, as in providing an offering that everyone can easily understand without having to resort to visual aids.

That, and make sure you strike deals with Roku, Amazon and all the smart TV OEMs this time.

If you’re an advertiser or consumer, our best advice is to wait a few weeks until things get sorted out and then you can make a much more informed decision than you’ll be able to make this week, but bear in mind that the lack of overlap between the HBO and Discovery audiences means a joint buy can be an awesome reach extender.