“When people turn on…their TV, it’s a terrible consumer experience.” That is a lot to take in, especially when it comes from entertainment giant Warner Bros. Discovery (WBD) CEO David Zaslav. And one of the biggest problems, as far as he is concerned, is that there are “…too many players in the market.” So how does Zaslav look to fix this? Some possibilities have emerged, but investors seem skeptical. Warner shares lost over 2% in the closing minutes of Wednesday’s trading.
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Zaslav laying it all out like that makes sense. The industry is ripe for consolidation of some kind. When things got started, and Netflix (NFLX) was the big deal in the sector, customers came in hoping that, one day, we would be able to watch whatever we wanted for a modest monthly fee. That made it attractive to early cable cutters.
Fast forward to today, and the market is so diffuse that the average American household has around four streaming services. This is a far cry from the early days, when we left cable’s non-stop price hikes for no new services or measurable increase in quality. Television these days is falling apart; just look at the upcoming 2025 season for SyFy: the only new show is Revival, while Resident Alien, The Ark, and SurrealEstate will be getting new seasons. And while some might note that Zaslav may be hoping to improve streaming by folding HBO Max into Paramount+ (PSKY), it seems about the only solution being considered right now is an old, familiar, and generally unwelcome one.
Price Hikes Incoming
You guessed it. The same thing you left cable for is now coming to streaming, as HBO Max is likely to see a price hike in the near-term. Zaslav noted, “People are really starting to love HBO Max. That’s the key. We want them to fall in love with our content, with our series, with the differentiated offering outside the U.S.”
Which makes sense, of course. But Zaslav followed that up with this: “We think we’re way underpriced. We’re going to take our time, because we’re really growing now and people are spending more and more time with us. But we think that there’s real upside to that. And it’s hard to replace quality content that people love.”
Is WBD Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on five Buys and 10 Holds assigned in the past three months, as indicated by the graphic below. After a 116.75% rally in its share price over the past year, the average WBD price target of $14.61 per share implies 18.65% downside risk.
