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You could soon see more ads on Warner Bros. Discovery's Max streaming service.
WBD said Thursday it would step up ads in Max as it — along with other media players — looks to improve the profitability of its streaming business.
In response to a question about the future of its streaming ads business, streaming chief JB Perrette said it was the "very early innings of what we call ad scale."
"On the ad load side, we are light," Perrette said during the company's third-quarter earnings call. "We have a very light ad load compared to everyone else in the market, so there's room to grow on the capacity side."
Max had 3.4 minutes of ads per hour as of the fourth quarter of 2023, which was lower than most of the other streamers.
Perrette said Max would continue to take a lighter touch when it comes to its prestigious HBO content, however. Last year, it introduced pre-roll and sponsorship ads to HBO shows but refrained from inserting ads in the middle of shows.
Perrette also said Max is still in the early stages of selling its ad-supported tier and introducing new ad formats.
"On the pricing and ad capacity side, we're very early in terms of ad format innovation to drive more creative formats for partners and marketers to work with us," he said. "So those three levers are going to provide a great amount of scale, so I think we're in early innings in the advertising revenue growth stream."
One of the big appeals of streaming initially was that it offered ad-free viewing. All the major streamers now have ad tiers, and while they started with a low number of ads per hour, ad loads are expected to creep up over time to make the numbers work. The newest player in streaming ads, Amazon, recently said it would increase its ad load in Prime Video after rolling out ads to the service in January.
Media players are still cognizant of not going back to the days of cable, though, where the ad loads can be twice that of streaming — or more.
"As others add a lot of inventory, we really like the idea that we're not doing that. You're not going to be interrupted watching 'House of the Dragon' or 'White Lotus,' at least for the foreseeable future," WBD president and CEO David Zaslav said on Thursday's earnings call. "We think part of the quality is the quality of the experience."
Execs didn't give a timeframe for the changes. It's possible it'll wait until it names a new ad sales chief. The role is currently held by Jon Steinlauf, who's set to leave the company by year's end.
WBD rolled out Max in 2023 with ad-supported and ad-free tiers, combining HBO's premium content and originals like "Succession" with Discovery+'s reality programming like "90-Day Fiancé" and Warner Bros. films and the DC Universe.
For the third quarter, WBD reported Max had its strongest quarterly gain in subscriptions since launching, adding 7.2 million subscribers for a total of 110.5 million. It also reported streaming profits of $289 million, up from $111 million in the year-ago quarter.
Still, Max is a minor player in streaming, capturing just 1.2% of monthly streaming TV time in September, tied with Paramount+ and ahead only of Pluto TV, according to Nielsen. Rival Netflix, by comparison, added 5.1 million subscriptions in its most recent quarter and now has 282.7 million subscribers in total.
