WarnerMedia’s big bet on video streaming will reach its first anniversary on May 27.
And while passing that mark may be cause enough for celebration at another business, the mood within WarnerMedia’s streaming unit might not be so cheery as that date approaches, given how uncertain its future is.
As HBO Max turns 1, it’s truly barely just begun. Massive changes loom both in the short term, with the addition of its ad-supported component set to launch in June, and the long term, where the pending merger between WarnerMedia and Discovery almost certainly means the new company will be reevaluating every aspect of HBO Max and how — or if — it will co-exist with Discovery+.
HBO Max launched in May 2020 with 10,000 hours of content from historied WarnerMedia brands like Warner Bros. and HBO and pricey licensed hits including “The Big Bang Theory” and “Friends.” But the service launched with only six originals (thanks to production delays), and distribution on Roku and Amazon devices, the two most dominant connected-TV device makers in North America, wasn’t secured until the end of the year. Soon after, HBO Max had begun a yearlong release of Warner Bros. films day and date with theaters, the most aggressive move any of its rivals have made to deliver first-run titles to subscribers.
Obfuscating the perception of HBO Max’s performance to date is WarnerMedia’s uniquely complicated SVOD reach stat of choice, “HBO and HBO Max subs.” The metric counts consumers who’ve signed up for HBO Max directly, consumers who gain access to HBO Max via a bundle deal (but haven’t necessarily used it) and those who are subscribed to linear HBO.
AT&T in Q1 reported 44.2 million U.S. HBO Max and HBO subs, up from 41.5 million in Q4 2020. Those sound like big numbers, but as of the end of December, only roughly 17.2 million consumers (41% of the HBO+HBO Max figure) had activated an HBO Max account.
HBO Max’s uptake in the U.S. wasn’t quite as robust as another new streaming service, Disney+. Some 16% of U.S. adults surveyed by YouGov said they used HBO Max in April, about 10 months after the service launched. In comparison, 24% of surveyed U.S. respondents said they used Disney+ in September 2020, about 10 months after that service launched.
The launch of an ad-supported tier will be an important milestone in the HBO Max timeline. However, that might not act as the supercharger some expect it to be in the U.S.
With the $10 price of the new tier without the day-and-date Warner Bros. films, some consumers seeking new video streaming content could just settle for other ad-supported video streaming platforms that are investing in freely available originals like The Roku Channel or Tubi.
A cheaper ad-supported tier of HBO Max may thrive particularly in international markets where consumers are more price conscious about SVODs. Just remember how Netflix in 2019 launched a mobile-only plan in India for $3 a month to better appeal to users in that market.
But the implications of adding an ad-supported component to HBO Max pale in comparison to what the addition of Discovery to WarnerMedia could mean for the service.
David Zaslav, Discovery CEO and to-be leader of the newly combined Warner-Discovery company, didn’t offer future streaming plans at the time of the merger announcement. It’s possible he could choose to house the two streaming services under one brand. Whether that brand would be HBO Max, Discovery+ or some third option would be a difficult decision. But it’s possible that both HBO Max and Discovery+ will continue to operate as standalone operations even after the merger closes in mid-2022 as planned.
Making Discovery+ and HBO Max available in some discounted bundle would mark a compelling offering in the streaming marketplace in essentially pairing prestige TV and film with guilty pleasure-unscripted content. Only 5% of surveyed U.S. adults had both HBO Max and Discovery+ in a May survey by Maru Group.
This type of bundling would help HBO Max, especially as it starts its global rollout in June (assuming the merger doesn’t change this date). Discovery+, which started rolling out globally in January, could eventually help introduce HBO Max to customers in territories in which it has already made inroads.
It’s a bit overwhelming how much remains up in the air for HBO Max.
And will live sports finally hit HBO Max, after WarnerMedia in late April struck a seven-year deal that gave it the rights to show NHL games on TBS, TNT and HBO Max?
Any speculative answers previously given to those questions are now subject to reevaluation, given the new assets that are now at HBO Max’s disposal.
The newly combined company could push for HBO Max to offer more original films annually in order to compensate for the catalogue hole that will be left by the previously announced plans to reverse course on Warner Bros.’ day-and-date film release strategy.
The company could also ramp up marketing of HBO Max companion podcasts, which are available on podcast platforms as well as within the HBO Max app. This could drive some HBO Max subs to stay engaged with HBO Max originals like “Raised With Wolves” when they’re away from the TV and even maybe help drive up the viewing completion rate of certain series.
AT&T expects the newly combined Warner-Discovery company will create $3 billion in cost synergies annually. Heightened HBO Max engagement would help Zaslav get better return on investment on original content.