In April 2023, at a press launch for Max, Warner Bros. Discovery’s new streaming service, Chief Executive Officer David Zaslav addressed an audience gathered at the historic Stage 14, which over the last century housed the productions of multiple cinematic icons, from Casablanca to The Goonies and beyond. 

“This year marks Warner Bros. 100th anniversary. A century of storytelling,” Zaslav said. “And now off we go, all together, to build Warner Bros. Discovery into the next century. And the real question for all of us is, what stories are we going to tell…that will define our legacy?”

But beneath the confident veneer, Zaslav and his team were battling to control how the company’s next century would unfold: would it be a story of reckoning, or one of redemption? 

That battle continues to rage today. Massive debt, a declining network television sector, and receding advertising revenue have left Zaslav in dire need of a profitable enterprise, turning Max’s launch into a matter of Warner Bros. Discovery’s survival. 

When Warner Media and Discovery, Inc. merged in April 2022, Zaslav, then the CEO of Discovery, Inc., was dealt a mixed hand. While the merger combined two enormous content libraries, it also saddled the newly consolidated Warner Bros. Discovery with more than $50 billion in debt. Since the merger, Warner Bros. Discovery stock has declined by over 50% as the company’s financial struggles have left investors uneasy. 

Zaslav has made lowering company leverage and attaining profitability a pillar of his tenure, dropping titles from the company’s digital shelves and canceling already-completed projects, such as Batgirl, in an effort to slash costs. Through these maneuvers, the company has paid down billions in debt, most recently repaying $2.4 billion in the third quarter of 2023. 

But the CEO knows that Warner Bros. Discovery–a studio that cut its teeth producing some of the most popular film and television properties in history–won’t reach profitability by just removing content. Zaslav and his team are outfitting Max, which offers a collection of exclusive titles from HBO and Discovery, along with children’s programming, live news, and sports, to be a one-stop shop that meets the needs of multiple demographics at once. 

“Max is the one to watch,” Zaslav said, referencing the streamers newly unveiled tagline. “It’s the place where every member of the household can see exactly what they want at any given time.”

The outcome of Zaslav’s “one to watch” strategy won’t become clear for some time, as Max’s debut has been complicated by the strikes that paralyzed Hollywood in 2023, says Geetha Ranganathan, an analyst with Bloomberg Intelligence.

Despite a modest uptick of 13% year to date in 2023, Warner Bros. Discovery’s stock has been on a decline since September, significantly underperforming the NASDAQ index in the last few months of the year as the since-resolved strike by SAG-AFTRA, the actors union, dragged on. 

In 2022, Warner Bros. Discovery earned approximately $43 billion in revenue and $13.8 billion in profits. The company has earned $12.4 billion in profits year to date for 2023, and analysts expect the company’s annual revenue to hit $41.5 billion. Revenue for 2024 and 2025 is estimated to increase slightly to approximately $42 billion. 

“[Warner has] done quite a remarkable turnaround,” Ranganathan said. “With the asset portfolio that Warner has, they're doing a really good job in terms of driving the profit metrics, which is what Wall Street is hyper focused on.” 

As streamers have overtaken traditional screening methods, viewers–inundated with content options but wary of paying for multiple subscriptions–have transformed into digital nomads, subscribing to one service to access specific titles before moving on. 

“Consumers have become increasingly savvy when it comes to how much money they're spending and how much time they're spending with these services,” said Richard Cooper, Consumer Research Lead at Ampere Analysis, an analytics firm focused on media and sports. “They will constantly move between [them], chasing the new release content.”

Access to HBO titles such as Game of Thrones is what prompted Hannah Fierick, a student in New York City, to pay for Max’s ad-free service while viewing content on other platforms through the accounts of family and friends. The one thing that could prompt her to cancel Max, Fierick says, would be an increase to the price of its ad-free service, which currently sits at $16 per month.  

Attractive programming and low prices are not always enough to retain subscribers; a service’s ability to optimize user experience and utilize user data for content recommendations are also necessity’s. 

“I'm going to show up at [Max] because I'm an Aaron Sorkin fan and I need to see the Newsroom for the 57th time. But at the end of each Newsroom episode, you've got to introduce me to something,” said Michael Smith, co-author of Streaming, Sharing, Stealing: Big Data and the Future of Entertainment. 

The streaming service that has managed to beat the game of subscriber hopscotch is Netflix, which debuted its first iteration of streaming in 2007 and has maintained an unyielding grip on the industry, leaving other services to vie for second place in the minds of viewers. 

Max’s main competition in this runner-up position is Disney+, launched by rival legacy media giant Disney in 2019. In terms of subscriptions, Disney+ has maintained the lead, with 150 million subscribers to Max’s 95 million. But subscriber numbers are not mutually exclusive with profitability in the streaming business. 

“Subscribers are necessary to drive revenue, to drive scale…but it's more critical for [streaming services] from a financial perspective to show that they can make money,” Ranganathan said. “From a profitability standpoint, I would actually say that Warner is slightly ahead of Disney.”

Max’s financial gains over Disney+ are no doubt good news to Warner Bros. Discovery, but its continued emphasis on profitability stands as a reminder that the company, with its heavy remaining debt load, has a more precarious balance sheet than its legacy media counterpart.

“They've made better-than-expected progress on getting to profitability, and I think they're going to continue to focus on that to show further improvement. Part of that is just for the overall survival of the company,” said Dave Heger, a senior analyst at Edward Jones. “They can't afford to see the kind of losses that Disney's been seeing in the streaming business.”

A pivotal facet of Zaslav’s strategy was removing HBO from the streamers name, a move that was met with derision, given the brand’s reputation in the cultural zeitgeist. 

But Zaslav’s decision has supported the company’s ultimate goal: to exploit widespread choice fatigue and provide a service that caters to the widest number of demographics as possible.

“They're trying to say, we hear this frustration, it's too much choice or too many subscriptions, let's put it into one and let's drive growth and value that way,” said Hannah Avery, Consumer Insights Director at Kantar Worldwide. “I think this was the right move.”

The hosting of Discovery’s library, which includes reality titles such as 90-Day Fiance, is a key feature in Max’s arsenal. The company’s unscripted offerings have proven especially important this year, as the summer’s dual Hollywood strikes delayed scripted productions. Warner Bros. Discovery has also added CNN Max, a live news channel, as well as live sports to Max.

Avery pointed to the company’s decision to prominently feature children’s programming as an indicator of the strategy’s viability in helping Max's service stand out from the crowded streaming industry.   

Ranganathan is optimistic that Zaslav’s strategy of consolidating the company’s assets under Max’s service,  targeting multiple viewer demographics via different content genres, and pruning underperforming titles will help Warner Bros. Discovery attract subscribers, drive profits, and ensure financial prosperity in the long term. 

“We've already kind of seen green shoots,” she said. “So if the metric has been, can [Max] both grow subscribers and be profitable? I think the answer is pretty much yes.”