By Joe Flint

A group of Warner Bros. Discovery executives gathered in a conference room at the Beverly Hills Hotel last spring to discuss a hard truth: Their Max streaming service was kind of a letdown.

It wasn't considered a must-have or utility service, like Netflix and Amazon Prime, but more of an add-on item, a strategy officer told the team, including Chief Executive David Zaslav and Casey Bloys, who runs content for HBO and Max.

Over snacks, coffee and Diet Cokes, they plotted Max's revival.

"We said, 'OK, we've got to sort of refocus our bull's-eye,'" said JB Perrette, CEO and president of global streaming.

Warner has spent the past year picking apart and rebuilding Max, turning it into one of the company's relative bright spots. The entertainment giant, born out of a 2022 merger between AT&T's Warner Media and Discovery Communications, has struggled to convince investors it is on the right track.

The company's stock is down about two-thirds since the deal.

Its movie studio suffered a string of flops before "A Minecraft Movie" and "Sinners" hit it big, and its cable networks are in structural decline. Building momentum at Max is a crucial part of the company's pitch to investors.

Max added 20 million subscribers in 2024 to finish the year at 117 million globally, and expects to hit 150 million in 2026. (Netflix, by comparison, ended last year with more than 300 million subscribers.)

The platform still has a relatively small share of U.S. TV time -- about 1.5%, according to figures from Nielsen. That is less than Peacock and Paramount+, though Warner executives say Nielsen's data doesn't capture viewing via Amazon Channels.

Max increased its adjusted earnings before interest, taxes, depreciation and amortization to $677 million last year from $103 million a year earlier. It forecast Ebitda of $1.3 billion for the current year.

Date with destiny

When Zaslav unveiled plans for the Max streaming service two years ago, he declared, "this is our rendezvous with destiny."

That destiny, as he laid it out at the time, was to be "the place every member of the household can go to." It offered critically acclaimed fare from HBO, popular reality shows from Discovery's cable networks and lots of children's programming.

But most consumers already had a streaming service for every member of the household. It was called Netflix.

From late 2022 until the end of 2023, Max's subscriber numbers hovered between 95 million and 100 million.

"What people want from us in a world where they've got Netflix and Amazon are those things that differentiate us," Bloys said.

After the Beverly Hills meeting, Max dropped its focus on children's programming, acknowledging it couldn't break through with young viewers already glued to Netflix and Disney+. Even sacred cows such as "Sesame Street" and the Looney Tunes content library were cut loose.

A lot of Discovery's unscripted shows, from channels such as Food Network and HGTV, also weren't moving the needle for Max. There is less of that on the platform now.

And while live sports were initially available on the lower priced ad-supported version of Max, now only those with the premium-subscription tier can get baseball, basketball and other sports.

Max's second life is more streamlined, with adult-oriented content like "The Pitt" and "Hacks," and true-crime offerings such as the documentary "Quiet on Set: The Dark Side of Kids TV." And HBO's highly anticipated "Harry Potter" series is scheduled to debut in 2026.

"We're not fighting for the more-is-better game," Perrette said. "We'll let others deal with the volume."

Bundling up

One key part of Max's makeover was a bundling partnership it launched with Disney last summer in which subscribers can purchase Max, Disney+ and Hulu at a significant discount to their respective stand-alone prices.

It has been a major subscriber driver, with high retention rates, and Warner executives have said they are eager to extend the partnership overseas.

Still, some investors want more wholesale progress from Warner. Late last year, the company restructured into two operating divisions -- one housing the legacy cable business and the other comprising the streaming operation and movie and TV production studios.

The move was seen as a potential precursor to a spinoff or sale of the cable business. Warner added directors with digital and technology chops after encouragement from activist Sessa Capital.

Should a split or spinoff happen, Max would be expected to serve as the "revenue-generating war horse for the company," said Guggenheim Securities analyst Michael Morris.

Write to Joe Flint at Joe.Flint@wsj.com

(END) Dow Jones Newswires

April 23, 2025 09:00 ET (13:00 GMT)

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