HBO Max With Ads May Cost $9.95 a Month

Could $9.95 be the magic price point for a cheaper version of HBO Max that includes commercials?

That’s the scuttlebutt according to sources who’ve spoken with CNBC, who remained anonymous. They also divulged that WarnerMedia at one point considered dropping the price of an AVOD (advertising video on demand) HBO Max as low as $4.99 per month.

“Whether a customer chooses to buy the ad-supported product or buy the straight subscription product, it’s accretive in the same ways to our business,” AT&T chief John Stankey said.

In simpler terms, any growth is good growth. And WarnerMedia, which last week announced combined subscriptions to HBO or HBO Max had reached 44.2 million customers, declared expectations to grow that base upward past 120 million close to 150 million four years from now. Attracting that many new customers means either massive expansion in content and/or serving up a cheaper option, and that means courting advertising.

What Stankey said in the earnings call last week:

“And as you know, we, for market reasons, haven’t entirely disclosed everything like pricing, et cetera. And we’ll, of course, do that right before the launch so that we get the maximum benefit of coming into the market. Look, I think that there is a segment of the base, and this is particularly true when there are multiple streaming services out there and people are making decisions to reorder their investment in in-home entertainment, that are going to be more price-sensitive. And while we believe HBO Max, without commercial interruption, as a premium product and warrants what we charge in the market today, we know that, that premium, in some cases, is high enough that there are people, when they start to say, “Well, I’ve got 3 services, and I aggregate everything out, that maybe I won’t make a choice to be in it.” And that’s particularly true if you look at maybe some younger demographics. And as a result of that, we believe getting the price point down where, for them to get some well-executed advertising, they would look at the product and service and stay within the portfolio, streaming services that they may wish to have in their household or in their apartment, that they think that this is a good place to be.

Another example will be in certain socioeconomic dynamics. So you can expect, for example, we believe the AVOD product actually pairs well with some of our prepaid offers and how we might position it because it tends to line up on a more price-sensitive socioeconomic dynamic. And we think that opens up marketing channel and awareness channel and ultimately an opportunity to drive penetration in other places where, again, customers are a bit more price-sensitive. So really, at the end of the day, a customer gets to make a choice. And there’s no question if you give a lower price point, you’re going to push it down lower in the demos that will ultimately subscribe to it. And I think that’s more important as people are making portfolio decisions of multiple services in their household. And when you see the reality of an ebb and flow on a Direct-to-Consumer offering, where maybe you hit that period of time where you’re not as enamored with the offering that we have on the new content that’s in place, having that option to be at a lower price point allows somebody to stick with the service. And we just think it’s a really smart place to be for that segment of the market.”

Of course, cable/satellite/fiberoptic providers such as Spectrum, Comcast, Cox and Verizon Fios won’t be happy about a cheaper HBO Max, as they get a cut of current HBO monthly subscription fees.

But the sources who spoke to CNBC indicated those negotiations might not be as difficult as what HBO discovered last summer at HBO Max’s launch with Roku and Amazon. Although those updated carriage agreements presumably included future arrangements for the forthcoming AVOD offering.

And $9.95 a month, while a full $4 less than Netflix, remains about that much more expensive than the AVOD options at Hulu, Paramount+ and Peacock.

But HBO famously told us earlier this century, it’s not TV. It’s HBO. As Decider’s Scott Porch reported earlier this week, “WarnerMedia’s Kilar has said that HBO originals will not include ads.” Kiler also said the AVOD HBO Max would not include any of WarnerMedia’s 2021 new movie premieres that otherwise will open simultaneously on the big screen as well as on HBO Max.

source: nypost.com