Despite a powerful programming line-up, the jury is out on whether the costly HBO Max can carve out a space for itself in the crowded streaming market. Tim Dams reports on WarnerMedia’s OTT play in IBC365’s series on new SVOD platforms.
After the underwhelming launch of Apple TV+ and the better than expected debut of Disney+ this month, there’s a brief pause before the next round of global streaming platforms come to market.
AT&T’s WarnerMedia has until May to perfect its HBO Max streaming offer, its online home for series like Game of Thrones, Friends, The Big Bang Theory, the Harry Potter films and DC Comics superhero movies like Batman, Superman and Wonder Woman, and classic films such Casablanca.
But already the jury is out about whether HBO Max can carve out a space for itself in the increasingly crowded streaming market.
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Some worry that WarnerMedia has left it too late, allowing Disney+ to make an early landgrab of subscribers. Disney+ surprised even itself by garnering over 10 million subscribers in its first day alone.
Others fear that HBO Max will struggle to convince people to pay for a service that costs $14.99 a month. By comparison, Apple TV+ is $4.99 monthly, or free to those who buy certain new Apple products, while Disney+ is $6.99. The most popular tier on Netflix is $12.99.
However, for $14.99, HBO Max is offering a lot of content. HBO Max will launch with 10,000 hours of programming spanning AT&T’s numerous brands, including series and films from Cartoon Network, CNN, DC, New Line, TNT, TBS, and Warner Bros.
Unveiling the service at an investor presentation day at the end of October, WarnerMedia stressed that its service would appeal to a wide cross-section of consumers, and stressed that many of its titles – like Friends, South Park and Game of Thrones - already boast passionate fans. In other words, the kind willing to pay to access them.
- Read more: WarnerMedia confirms D2C HBO Max service
Betting on content
The service will also put out 31 original series during its launch year. These include House of Dragons, a 10 episode prequel to Game of Thrones, revivals of the classic Looney Tunes (Bugs Bunny, Porky Pig) cartoons, and a new series featuring the Hanna Barbera characters (The Flintstones, Jetsons, Yogi Bear, Mr. Jinx) called Jellystone. There’s also a new Ridley Scott sci-fi series, Raised by Wolves, and a Green Lantern inspired series from Berlanti Productions.
HBO Max will also have acquired titles including Rick & Morty, The O.C., The West Wing, and South Park. WarnerMedia bought the latter last month for a reported $500m, proving that it is prepared to bet heavily on HBO Max being a success.
“We are attracting top talent to bring in a wide variety of original ideas, curating the rich library assets of this company, and acquiring the most compelling third-party programming available,” said Kevin Reilly, chief content officer of HBO Max, at the special investor event.
Ampere Analysis says that HBO Max has a catalogue of higher average quality than all other US platforms, according to its Ampere Critical Rating measurement, with a comparable number of premium titles compared to other platforms.
WarnerMedia also showed off the first look of HBO Max’s product interface at the investor event, where it stressed the importance of human curation, instead of simply relying on algorithms like Netflix and other competitors.
It played up its new Recommended by Human’s feature. This will give celebrities and influencers their own pages where they can list their own recommendations, which HBO Max customers can choose from.
“We are attracting top talent to bring in a wide variety of original ideas, curating the rich library assets of this company, and acquiring the most compelling third-party programming available,” Kevin Reilly, HBO Max
AT&T says it intends to invest significantly in HBO Max. It has set aside $2 billion for 2020 and plans continued investment in following years. That investment includes spending for new content, technology, marketing, and foregoing licensing revenue of its own content to other broadcasters and platforms. In 2018, for example, WarnerMedia struck a $100m deal to allow Netflix to air Friends during 2019; this revenue will be lost now that WarnerMedia has decided to reserve its own content for HBO Max.
AT&T is targeting 75-90 million subscribers for HBO Max by 2025, with 50 million from the United States and the remainder from Latin America and Europe. By contrast, Disney said it expected to have 60 million to 90 million Disney+ subscribers by 2024. Netflix’s subscriber base stands at 158 million.
- Read more: Disney bets big on the streaming revolution
AT&T itself is also going to push HBO Max through its own subscriber base. At launch, AT&T will offer HBO Max to the roughly 10 million HBO subscribers on AT&T distribution platforms, at no additional charge. Subscribers to HBO’s current streaming platform, HBO Now, will also have access to HBO Max. AT&T customers on premium video, mobile and broadband services will be offered bundles with HBO Max included at no additional charge.
Tim Mulligan, EVP and research director of MIDiA Research, thinks that HBO Max has a strong competitive advantage because of its ownership by AT&T, the largest telco in the US. “It has access to 170 million US subscribers already,” he points out.
He also says the US repeal of net neutrality rules in 2017 could allow AT&T to prioritise its own streaming service by optimising the viewing experience for subscribers.
Outside of the Americas, however, Mulligan believes that HBO Max has “a huge challenge internationally.” While AT&T is strong in the US and Latin America, it does not have a major presence elsewhere in the world.
Alongside this are the unresolved tensions inherent in a major licensor like WarnerMedia seeking to avoid cannibalising revenues via the direct-to-consumer HBO Max launch.
“HBO has done some spectacularly lucrative licencing deals in key markets that impede its ability to launch its own direct to consumer services there,” says Mulligan.
For example, last month HBO renewed its long-running programming output deal with Sky for its European territories. The relationship has meant that HBO hasn’t operated a network in Sky’s core markets, instead of getting paid for its content by Sky.
- Read more: HBO and Sky strike new EU programming deal
The renewal is likely to mean that HBO won’t launch its HBO Max streaming service in the UK and other Sky markets, at least as long as the new deal is in place.
“HBO has done some spectacularly lucrative licencing deals in key markets that impede its ability to launch its own direct to consumer services there,” Tim Mulligan, MIDiA Research
HBO has long used different strategies to make money in different international markets — from operating its own networks, like in the US, running streaming-only services in others, and simply licensing its content to strong local players in a third set of markets.
And it looks like this model is set to continue with HBO Max.
“We’re prioritising our international expansion in Latin America and Europe where we currently operate HBO networks and have existing over-the-top services,” WarnerMedia CEO John Stankey said at the HBO Max WarnerMedia Investor Day presentation.
He added that elsewhere HBO would be “leaning on our licensing relationships with key partners in territories where we believe market conditions warrant a different approach.”
Meanwhile, there’s a question mark about the number of subscription services that households are prepared to pay for. With many homes already paying for Netflix and Amazon Prime Video, are they going to be open to spending an additional $15 for HBO Max?
Tom Harrington, senior research analysts at Enders Analysis, says that the greater variety and quality of services from new platforms like HBO Max will likely increase the average number of subscriptions (which currently stands at less than one per household in the UK). However, given Netflix’s incumbency, library and distribution, Harrington reckons new entrants will battle for a supplementary role.
As to whether HBO Max can succeed in the battle, the predictions are mixed. In its favour is a strong library of content and the heavyweight backing of AT&T in the US and Latin America. Factors against include cost and WarnerMedia’s apparent hesitation to roll HBO Max out in some markets the world.
Right now, it seems the jury is very much out on HBO Max.