WarnerMedia Streaming Service Likely to Cost $16-$17 Monthly, Bundle HBO and Cinemax (Report)

WarnerMedia’s entry into the streaming wars may not just be built around HBO — it will reportedly include the premium service bundled in the initial baseline package.

The AT&T-owned media company is looking to launch the still-unnamed WarnerMedia subscription VOD service at a price point of $16-$17 per month and is likely to bundle together HBO and Cinemax along with Warner Bros. TV shows and movies, according to a Wall Street Journal report citing anonymous sources.

That would make WarnerMedia’s SVOD service slightly higher than the standalone HBO Now ($14.99 monthly), and pricier than Netflix’s standard two-stream HD plan ($12.99), Showtime ($10.99) and Hulu’s VOD packages ($5.99 with ads; $11.99 without) — and more than double Disney Plus, slated for a Nov. 12 launch at an aggressive $6.99 per month price.

Reps for WarnerMedia and HBO didn’t respond to requests for comment.

Why would WarnerMedia want to go out with a “fat” SVOD bundle, particularly as it faces numerous lower-priced rivals? The challenge for WarnerMedia is to leverage HBO as the backbone of the new streaming service — without undercutting existing HBO pricing or contributing to cord-cutting.

AT&T CEO Randall Stephenson, at a J.P. Morgan investment conference last month, said WarnerMedia’s go-to-market strategy for the SVOD service will rely on pay-TV providers like Comcast and “push digital distribution on top of that as well.” He said HBO customers on pay-TV platforms would get the WarnerMedia SVOD service included.

While the WarnerMedia streaming service will be anchored by HBO, “we’ll surround that with the Warner Bros. library,” which includes recent releases like “Aquaman” and “A Star Is Born” and classics like “Casablanca,” Stephenson said at the conference on May 14. Warner Bros. also owns rights to a large number of TV shows, including “Friends,” “Seinfeld” and “The Big Bang Theory,” and “we’ll be bringing a lot of these licensing rights back to ourselves,” he said.

AT&T has said the WarrnerMedia’s direct-to-consumer SVOD service will debut in the U.S. in a beta form in the fourth quarter of 2019, with a full launch in Q1 2020. It hasn’t announced pricing. The initial plan was to launch with three tiers — an entry-level movie-focused package; a service with original programming and movies; and one that provided the content in the first two plus a library of WarnerMedia and licensed content. However, the three-tier strategy has been scrapped in favor of a single plan, per the Journal.

The telco has set high expectations for the new WarnerMedia SVOD service. Stephenson, at the investment conference, said it will “become a significant driver of our growth over the next few years as we stand this product up… We think this is in the tens of millions of subscribers that we will have on this.”

In shakeup last week, WarnerMedia CEO John Stankey moved oversight of the streaming product under Otter Media CEO Tony Goncalves. Andy Forssell, most recently Otter’s COO, stepped into the role of EVP and GM of the service reporting to Goncalves. Brad Bentley, a longtime DirecTV exec who had been leading the WarnerMedia SVOD development, has exited.

Note that AT&T has a vested interest in rolling out a streaming service that’s designed to not upset the pay-TV apple cart, given that it has a large (but declining) business with DirecTV and U-verse.

In the first quarter of 2019, AT&T dropped 544,000 net subscribers across DirecTV and U-verse TV, to stand at 22.4 million at quarter’s end. That included a 83,000 sequential decline for DirecTV Now, down 5.2% in the period to 1.5 million customers, as AT&T ended promotional pricing, hiked rates on existing packages, and rolled out two new bundles that include HBO as a standard part of the package.

According to the Journal report, after the initial paid-streaming launch, WarnerMedia is mulling the introduction of a cheaper, ad-supported version of service later in 2020, similar to Hulu’s entry-level SVOD offering.