Netflix’s Reed Hastings can relax a bit. HBO Max is poised to become a much less aggressive competitor in the streaming market.

That’s the implication of a sweeping strategic shift outlined Thursday night by top executives at Warner Bros. Discovery Inc., the company resulting from the April merger of Discovery Communications and WarnerMedia, formerly owned by AT&T Inc. In a call with Wall Street analysts, CEO David Zaslav and his lieutenants made it clear that they wanted to bring Warner’s business back to one focused on making as much money as possible, away from just racing with a consumer-centric philosophy espoused by former WarnerMedia CEO Jason Kilar. It’s a big risk.

Among other things, Warner’s team said they would drop the idea of ​​making films solely for streaming release, which Kilar’s team had initiated; abandon previous management’s strategy of preserving Warner-created content primarily for HBO Max; and bringing back the traditional Hollywood emphasis on “windowing,” the idea of ​​airing the same movies or shows on different mediums at different times to maximize revenue. Oh, and Warner has confirmed plans to combine HBO Max and Discovery+ into one service, launching next summer.

Along the way, they also left little doubt that the new service will cost consumers more. Streaming is “undervalued,” Zaslav said.

His strategy is a huge step backwards for consumers – and one that risks backfiring. For decades, television companies operated ignoring what was right for viewers. Television networks blocked so many ads on shows that television became inaccessible. The price of cable and satellite television has steadily increased. A great movie didn’t appear on TV until long after it hit theaters because studios wanted to make money selling DVDs.

This set the stage for the emergence of Netflix about 15 years ago, offering a more user-friendly approach to low-cost, ad-free streaming with a deep mix of original content, including new big-budget movies. It proved extremely popular. Netflix has approximately 221 million subscribers worldwide, including 73 million in North America. No other service comes close (except perhaps Amazon Prime Video, whose video is a feature of Prime).

Admittedly, this low-cost streaming model has yet to prove hugely profitable. Netflix has only recently begun to show that it can make real money – and it’s done that in part by raising prices so much that it’s lost subscribers. For Zaslav, who comes from the old-school TV industry that made a virtue of essentially printing money, it’s understandable that Netflix’s approach isn’t appealing. Let’s also not forget that Warner Bros. Discovery is a roughly $50 billion indebted company that expects to generate $9 billion to $9.5 billion in earnings before interest, taxes, depreciation and amortization in 2022. The changes Zaslav’s team is pursuing will help generate much-needed additional revenue. Company executives predicted EBITDA of $12 billion for 2023.

The danger is that the strategic shift leaves Warner Bros. Discovery vulnerable to competition. In the world of entertainment, power has shifted from the big TV companies to the viewers more than Zaslav seems to realize. It operates with a 1990s mindset. HBO Max’s competition includes, besides Netflix, services run by tech companies such as Apple TV+ and Amazon Prime Video, which could also operate with a consumer-centric ethos. . They also have significant financial resources and do not rely on making big profits from television, which gives them an edge over traditional entertainment companies. By raising prices and reducing the amount of truly exclusive content on its streaming services, Zaslav is only giving viewers a reason to switch.

He must accept the reality that the old days are over. Television will never again be a monumentally profitable business. Streaming has to be profitable enough to attract investment, that’s for sure. But times have changed. There is no turning back.

More writers at Bloomberg Opinion:

• Blocking WarnerMedia deal won’t solve streaming: Tara Lachapelle

• Netflix wins streaming’s own ‘squid game’: Tara Lachapelle

• Disney shares Netflix pain over user registrations: Tara Lachapelle

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Martin Peers is a Bloomberg Opinion columnist covering technology and media. Previously, he was associate editor of the Wall Street Journal’s Heard on the Street column and news editor.

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