As WarnerMedia gears up for the release of a planned ad model for its recently launched HBO Max product, its parent company has reportedly run into a number of problems—including the fact that absolutely no one wants ads on premium content, including some of HBO’s business partners.
Citing sources familiar with the matter, the Information reported that WarnerMedia parent AT&T has run into a number of issues with its ambitions of bringing a cheaper ad-supported tier to the HBO Max service, which combines all of WarnerMedia’s content with HBO’s legacy content, licensed movies, and new originals. The problem appears to be existing agreements with cable distributors as well as studios who have licensing deals with HBO under the specific condition that content remains ad-free.
HBO Max’s apparent rat’s nest of complications reportedly involves not only existing contractual issues but extends to branding, pricing, and increased competition in the streaming space. Right now Netflix goes for $12, Disney+ goes for $7, and ad-free Hulu goes for $12, and HBO Max launched at its steeper $15-per-month price point to keep its cost identical to what cable distributors charge for traditional HBO. A new, super-stuffed version at a discounted rate didn’t make a lot of sense when HBO Max finally launched.
(Despite all that HBO Max, evidently grasping for subscribers, is being offered at a discounted rate of $12 for a year during September.)
Branding-wise, the Information reported that executives are concerned about tarnishing HBO’s premium brand by slapping ads on its content. But from the programming side of things, ads on legacy HBO and newer HBO Max series may not necessarily be appealing to many advertisers given the adult nature of a lot of that content. What HBO Max is left with, then, is a question of whether it should run ads on some content and not others. But that doesn’t work either.
If HBO Max, for example, attempted to exclude ads from older HBO programming and new HBO Max originals on a cheaper, ad-supported tier, there wouldn’t be a lot of incentive for folks to cough up $15 a month for premium. (Unless they were really only subscribing for the other, non-HBO and HBO Max content, which seems exceptionally unlikely.) Why would I pay $15 a month when I could get ad-free HBO and HBO Max stuff at a cheaper price? Nixing the HBO Max originals altogether from an ad-supported tier, meanwhile, is also a bad bet if the company wants to win over new subscribers in an increasingly crowded streaming space.
All of this is complicated by the fact that HBO Max is still in a standoff with Amazon and Roku, whose platforms don’t support the service and cut off a rather significant number of potential subscribers.
In other words, much like the service itself, AT&T’s ad-supported HBO Max scheme is a damn mess. It’s never made much sense for the brand as a whole, and yet AT&T appears to think that it can fit its square money conundrum into a round, ad-shaped hole. AT&T chief John Stankey said earlier this year during an interview with Squawk Box that the company thinks “the long term dynamics will be both subscription and advertising supported.” And while it’s easy to see that HBO Max was the brainchild of a room full of executives looking to squeeze assets for some fast cash, AT&T appears pretty well-positioned to shoot itself in the foot regardless of how it moves forward.
Increasingly, it’s looking like the grand ambitions of Quibi were not, shockingly, the worst streaming idea of 2020. And folks, that’s saying something.