JB Perrette, Warner Bros. Discovery CEO for Global Streaming and Games spoke about the company's gaming business at the Morgan Stanley Technology, Media & Telecom Conference.
During the livestreamed event, Perrette started by explaining that he expects VR and AR devices like Apple Vision Pro to increase in scale and adoption, and owning both the IPs and development studio is a differentiating factor for the company.
We think it's a meaningful differentiator for us. We see the world and VR devices, the [Apple] Vision Pro, the virtual world... who knows exactly how it evolves, but certainly these types of platforms are only going to increase in scale and adoption, and having 11 owned studios where we're not just a publisher of games but we're actually a developer of games, we think it's a differentiating asset for us.
He then explained how the gaming business mostly revolves around four specific IPs, Mortal Kombat, Game of Thrones, Harry Potter, and the DC universe.
Today the majority of our business revolves around 4 main forms of IP in games which are all billion-dollar-plus businesses themselves, which is Mortal Kombat, Game of Thrones, Harry Potter, which obviously had success with Hogwarts Legacy last year, it was the best-selling game in the world... and the DC World.
DC obviously has sub-segments underneath there with Batman being one of the biggest. Those are our four that make up the majority of our business.
Perrette argued that the AAA console-based business is "very volatile" as success stories like Hogwarts Legacy can lead to a great year, followed by disappointing ones with no releases or with underperforming ones like Suicide Squad: Kill the Justice League.
The challenge we had is that our business historically there has been very triple-A console-focused based and as you know, that's a great business when you have a hit like Harry Potter, it makes the year look amazing, and then when you don't have a release or unfortunately we also have disappointments... We just released Suicide Squad this quarter which was not as strong, it just makes it very volatile.
We hear that WBD sees an opportunity to expand into mobile and multiplatform free-to-play games that can offer better and more consistent revenue, on top of live services.
We think the opportunity for us, again, this is multi-year because games are a long-cycle business too, but the opportunity is to take those four franchise and be able to develop a much more holistic approach, particularly around expanding into the mobile and multiplatform free-to-play space which would give us a better and more consistent set of revenue, and you'll see us launching later this year some mobile free-to-play games which we hope will start building that.
And then secondarily, live services. Rather than just launching a one-and-done console game, how do we develop a game around for example Hogwarts Legacy or Harry Potter that is a live service where people can kinda live, and work, and build, and play in that world on an ongoing basis.
We think we got the franchises. We got some of the greatest studio capabilities, and we have a roadmap and a strategic investment to try and build out that business, and we think there is meaningful growth over the course of the next couple of years.
Perrette also added that WBD just hired someone who will help with franchise management overall at the company in a "new, bigger, more consistent way" and argued that owning the IPs and the studios at the same time is of proven value.
It doesn't just improve the longevity of a franchise's life cycle where there may be a movie and then three years with no releases, but it also brings the franchises to younger generations, since the "demographic of the gamer population is skewing younger than some of the other media forms."
Asked whether he's confident that the gaming business will drive growth for the company over the longer term, Perrette mentioned that WBD is laying the foundations now to achieve more growth around 2025, 2026, or 2027.
There's a lot of punditry particularly in the last 10 days out there trying to look at the state of the industry and portray it as it was the bottom of the ninth inning. We fundamentally disagree.
We look at this as we're at the top of the second. It's certainly on the WBD side, for all the reasons we just talked through, we have a number of different vectors that are not theories, but are not theories, but they're practice that we're executing on that will help us deliver that growth, so we're very optimistic about what can happen and the longer-term potential of the margins in that business, we think are exciting.
And games is in the earlier stages of the development cycle and it does take a few more years, so you'll see all the building blocks in 24 and 25, 26, like we did on streaming, but we think we're doing the right thing now to lay the foundations for more of a 25, 26, 27 kinda timeframe of more growth on the game side.
If you don't care all that much about Perrette's live service vision but prefer an accomplished single-player game, Hogwarts Legacy is currently available for PS5, Xbox Series X|S, PC, PS4, Xbox One, and Nintendo Switch. You can purchase a copy on Amazon.
On the other hand, Suicide Squad: Kill the Justice League is available for PlayStation 5, Xbox Series X|S, and PC. Rocksteady recently announced extensive post-release plans.
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