Warner Bros. Discovery Shows Its Cards, Now Comes The Hard Part

“Chapter One”

Recently the first installment in the future of the DC Comics brand, a key area of growth for Warner Bros. Discovery, (NASDAQ:WBD) was presented with both investors and audiences being brought into the fold. While it may not have been planned to coincide, we also saw multiple news beats from other WBD areas coming out as well – all painting a picture of how this new David Zaslav-led regime will handle the next generation of these storied companies.

Yet the reveals may have been the easy part. Now not only do they need to execute, they need to get buy-in from all external parties.

So can they? And…

Will this time really be different?

First as always, some background.

I could use this space to recount the trials and tribulations of past WB/Discovery properties, but if you are reading this, you likely know the score. While Discovery’s been steady, Warner Bros. has been anything but… resulting in a very uneven slate of projects.

In one corner you have HBO and its powerhouse slate ranging from Succession to Game of Thrones, and on the other you have Warner Bros. with a string of miscues that sounded great on paper but weren’t so great on screen.

The challenge was merging those units and others so all lived in a symbiotic space.

No easy feat.

Enter James Gunn and Peter Safran

WBD topper Zaslav turned the keys to the kingdom over to the pair to help with the WB side of things, specifically the DC slate of super-heroes and villains. What Zaslav and his team understand – that it seems prior leadership did not – is that the DC universe has the power and potential to drive WBD as a whole, the way Marvel does for Disney.

Gunn and Safran’s mission was “simple” – create a Bible that outlines the future of DC’s characters.

While it sounds simple, it is not. Like Marvel, DC relies on its fans to succeed and comic fans are not exactly a quiet bunch. They have no problem sharing their thoughts… very loudly.

The difference here is that Gunn and Safran understand that, as Gunn especially isn’t just a creative, he’s a fan. While his work can be polarizing at times, he honors the source material in the right way that garners respect from its loyal base. He knows what built the DC brand and will try to stay true to it, while giving it an upgrade for modern audiences.

The pair’s “Chapter One” (which will be DC’s version of Marvel’s “Phases”), is entitled “Gods and Monsters” and designed to showcase their combined vision. The goal is multiple film and TV projects each year that are both separate but interconnected. Essentially doing what Marvel does where the projects stand on their own, but it all ties together to paint a larger tapestry of stories.

The biggest takeaway though is that to accomplish that, they would set up a system of continuity where the same actors were playing the same role across all the mediums. So, a situation where Ezra Miller playing The Flash on the big screen and Grant Gustin playing The Flash on the small screen would be less likely to happen. Ultimately, while Gustin’s Flash series and his fellow Arrow-verse ventures was a massive success, it still spotlighted the glaring flaws between divisions.

For as good as The CW TV shows around DC characters performed, that’s about as bad as the WB movies around DC characters bombed. To be fair, pre Disney+, Marvel had the same problem just reversed, as its movies were big successes and its TV series were a mess.

Marvel righted the ship and now its DC’s turn.

The hope being that by getting DC straightened out that would help get the rest of the roster in order. This way you have DC firing away, HBO firing away and everything else in between falling into place.

Speaking of HBO, we recently got a look at that evolving situation and had some unanswered questions of its own come to light.

Namely what their plans were for the multiple series that were scrubbed from HBO Max recently.

The thought was they would be packaged and positioned as the core of a free, ad-supported streaming television (FAST) channel strategy and that proved correct. The larger mystery was where and how, which we just got an answer to in recent days.

Roku (NASDAQ:ROKU) and Tubi will serve as initial partners for WBD’s new FAST channels. It is there you can now find some of HBO’s prior priority titles including Westworld, The Nevers, The Time Traveler’s Wife and multiple others.

FAST is becoming big business for studios and Zaslav saw an opportunity to get into the mix.

It makes sense on paper as by peeling off some of the company’s newer library titles that aren’t as big of draws on HBO Max, they can open up a new revenue stream.

We know Zaslav has been in selling and tightening mode since he entered the fray and this fits that approach, but what’s interesting here is the trap he may be unwittingly walking into with this latest venture.

Remember, the growth of streaming started when Netflix (NASDAQ:NFLX) built its library on acquired content. All of the networks were thrilled to sell their programming to them because they saw it as free money, but they really were just feeding a beast that has since come after them.

I don’t see Roku or Tubi growing to a Netflix level, but it doesn’t have to be in order to do damage. It just must establish itself as a service with enough content to sustain viewer interest.

Why? Because it’s free.

Audiences will put up with limited commercials if it means saving money in today’s economy. And in many cases, the content was previously premium that they now can get for no cost, it’s a big value proposition.

What’s funny to me is that in Gunn’s comments to the media on “Chapter One”, he effectively rallied against the concept, albeit indirectly.

“No one was minding the mint. They were giving away IP like they were party favors at any creator who smiled at them.” – James Gunn

Now Gunn was referring to DC IP that was being given out without real thinking behind the “how,” but it ties in here as well. WBD (and others) are playing loose with IP left-and-right to get an immediate influx of cash or overall savings. While the terms may be more favorable than in past cases, it’s the thought that they are taking an extra level of content away from its own paid-services.

Yes, The Nevers was never a big hit for HBO; collectively, it was part of a larger catalog that holds value. For every Sopranos there is a Wire, and for every Sex & The City there is an Insecure – shows that do well, but not Game of Thrones well. Streaming is where audiences can find those shows and they can take on a second life – but stripping them out poses a risk. With the exception of Westworld, the shows switching over are mostly one-level below Wire and Insecure, but no less valuable to the bigger picture.

Again, them now being free via FAST gives more users access, but with content being key in streaming, you have to wonder if this revolving door of deals could upset that balance. And it’s not just WBD; Disney (NYSE:DIS) is reportedly looking to play in that area as well as it to tries to re-arrange some of its practices… but that’s a story for another day (as is WBD’s decision to keep a Discovery+ standalone option).

Here though, the ultimate question with the DC approach and the HBO deals is…

Will they work?

Early reaction has been mostly positive, but it is really too early to tell. As I said, this was the easy part. The more complicated aspect is still to come as now we wait. And investors don’t love waiting for results, especially when they have been waiting for so long.

The best investors can do is believe that Zaslav, Gunn, Safran and the other executive team are right and have learned from the mistakes of their predecessors.

If not… winter could be making a comeback.