Warner Bros. Discovery reveals plans for free streaming service

Warner Bros. Discovery, the media colossus formed this year by the fusion of the parent companies of HBO and Animal Planet, revealed the scope and strategy of its streaming ambitions for the first time, telling investors on Thursday it would offer free and paid services, with the goal of reaching 130 million paying subscribers by 2025.

David Zaslav, the company’s chief executive, said one new product would be a single paid subscription streaming service with programming now distributed on HBO Max and Discovery+. He also said the company would launch an unnamed free streaming service supported with advertising, hailing the new company’s “bouquet of owned content.”

“The fact is there are only a handful of companies globally that can do what we do,” Mr. Zaslav said. “And putting it all together, we believe no one does it better than us.”

He did not say what the new streaming services would be called, or how much the company would charge for the paid version. The combined subscription service will be available next summer.

The executives at Warner Bros. Discovery have major challenges ahead. The company was saddled with $55 billion in debt when it went public in April, the result of a spinoff that combined AT&T’s WarnerMedia division with Discovery. Mr. Zaslav is facing pressure to pay down that debt while competing with giants like Netflix and Disney in the costly streaming wars.

The company is also facing expectations from Wall Street to cut costs. Warner Bros. Discovery has said it will find about $3 billion in savings between the two companies, a corporate imperative that will result in layoffs for overlapping business functions.

Mr. Zaslav and his lieutenants have already done some work on that front. In April, one of their first moves was to shut down the CNN+ streaming service, a moonshot subscription product that was promoted as the network’s bridge to the future. Mr. Zaslav has told Wall Street that he doesn’t expect Warner Bros. Discovery to win “the spending war,” signaling a more disciplined approach to the pricey streaming business.

In the months before Discovery took control of Warner Bros. and HBO, Mr. Zaslav went on a roadshow of a sort in Hollywood. His message seemed designed to reassure a skeptical movie industry: We may be reality-television people, but we love theaters and have deep respect for your unique, time-honored culture, including catering to talent.

Since the deal closed, however, Mr. Zaslav and his lieutenants have revealed that such talk goes only so far. This week, they junked a nearly finished film, “Batgirl,” which cost $90 million to make and was headed to HBO Max. The move alienated the movie’s up-and-coming filmmakers and star, but Discovery decided that a write-off — taking a tax credit — was the most financially prudent route.

It is almost unheard-of in the movie business for nearly finished work to be thrown away, never to be seen anywhere, prompting a question in the talent community: If I sign up for a Warner Bros. movie, might the same thing happen to me?

Warner Bros. Discovery addressed the decision to scrap “Batgirl” on a conference call with investors on Thursday. Gunnar Wiedenfels, the chief financial officer, said executives had determined that certain HBO Max original films like “Bat Girl,” “Wonder Twins” and “Scoob!: Holiday Haunt” did not fit the combined company’s plans to generate “maximum returns” on its investment in content.

Mr. Zaslav said the company would focus on attracting top-tier storytellers for its TV and film businesses and curating the best possible shows and movies for its streaming services.

“It’s not about how much,” he said. “It’s about how good.”

JB Perrette, the company’s streaming chief, said he expected the streaming business to be profitable in 2024 and generate $1 billion in profit by 2025.

Later during the call with investors, Mr. Zaslav said Warner Bros. Discovery hadn’t found a business case for premiering expensive blockbusters on streaming services, adding that the company would remain focused on exhibiting its biggest movies in cinemas, where profits are higher. That’s a departure from the strategy adopted by Jason Kilar, the former chief executive of WarnerMedia, who opened franchise films like “Wonder Woman 1984” on HBO Max.

“That’s why most people got in this business — to be on the big screen when the lights went out,” Mr. Zaslav said. “That is the magic, and the economic model is much stronger.”

Warner Bros. Discovery began its life at a tumultuous time for the media industry. The company’s stock has fallen about 30 percent from its initial price of about $24, as investors have become more skeptical of video streaming businesses and the advertising market has tightened up. Netflix’s stock is down about 36 percent during the same period, while Paramount’s stock has fallen about 30 percent. The S&P 500, an index of the largest publicly traded companies, is down about 8 percent.

Shares in the company fell more than 11 percent in after-hours trading.