While recent headlines have been filled with the massive repercussions of WarnerMedia’s game-changing announcement that HBO Max will see every 2021 title from the Warner Bros. theatrical slate released the same day as in theaters, the implications for the streaming business are being overlooked. But the impact on HBO Max will be profound.
1. HBO Max Subscriber Base Will Get a Big Boost
As of Q3 2020, the reported number of “activations” — HBO subscribers who signed up via an MVPD service but have logged into Max with their credentials — is on the low side.
With access to the theatrical movies exclusive to HBO Max and not linear HBO channels, this should boost not only HBO Max activations from linear subs but sign-ups from new consumers.
AT&T CEO John Stankey recently revealed that total HBO Max “subscribers” have grown by around 4 million in Q4 to date. Technically, this figure includes HBO TV subscribers accessing HBO Max as well as dedicated Max-only subscribers, but it won’t be until the Q4 earnings call when the details behind this growth emerges. In VIP’s estimation, a high proportion of this will be from HBO Max being available on Amazon Fire devices in November.
The impact that this decision will have on “subscriber” — HBO TV subs accessing Max as well as new sign-ups — counts look to be significant. Market research firm Maru/Matchbox ran an exclusive poll for VIP, finding that 71% of HBO TV subscribers who haven’t yet accessed HBO Max are more likely to do so in the wake of the Warner Bros. announcement. Based on AT&T’s Q3 numbers, that’s 71% of 20.1 million, or 14.27 million.
On top of that, 30% of U.S. adults age 18+ said the availability of the movies on HBO Max made them more likely to subscribe to Max. This represents a significant growth opportunity, and means that total U.S. subscribers to HBO Max in the 20-25 million range should be feasible by Q2 2021.
2. A Roku-HBO Max Deal Will Come Soon
The movie shift compounds the pressure on Roku, the one connected device operator not to have an arrangement with HBO Max, to come to terms with WarnerMedia.
This pressure would amplify once HBO Max launches its AVOD service in 2021. Details are extremely limited, with it unclear if this would be free, like Pluto TV or Peacock’s base tier, or have a lower fee, like CBS All Access and Hulu’s ad tier.
Either way, were this to include access to the theatrical titles, the revenue that would be generated from advertising would be considerable and likely more lucrative than what could be earned from new subscribers paying for HBO Max (see here for VIP’s breakdown of a similar model from Discovery+).
Connected devices like Roku, Samsung and Amazon Fire typically take a share of the ad inventory on a service (similar to how an MVPD gets a slice of the ad break on cable networks). Given the likelihood that a large number of viewers would be watching HBO Max AVOD, it’s highly probable that Roku’s investors will pressure the company to come to terms with AT&T to capture their slice of the pie.
3. HBO Max Will Force Its Competitors to Add Movies but Not Without Extra Cost
Given the price-point difference between HBO Max and media-conglom peers, Max is already at a premium. Its competitors can’t simply add big-value theatrical titles.
What can be expected is continued innovation. Studios already introduced new PVOD and SVOD strategies in 2020. For PVOD, titles were either sold directly to the consumer via TVOD interfaces (think iTunes, Vudu, Amazon) or for an additional fee within an SVOD (titles like “Mulan” available via Prime Access on Disney+), while some studios sold titles earmarked for theatrical release to thirsty SVOD services that wanted fresh content amidst the COVID-19 production shutdown.
It would come as no surprise if Peacock, Starz or the soon-to-come Paramount+ were to add a new tier for, say, $10 a month extra that included early access to their theatrical slate. This wouldn’t necessarily have to be along the same lines as the HBO Max deal; for instance, access could come 28 days after a theatrical and PVOD release but would mean being able to tap into a new revenue stream.
It should also be noted that Disney was firmly against a similar idea on Disney+, with the company using its recent investor day to state they will continue to release select titles at a premium via Prime Access before rolling the title into the regular Disney+ slate months later.
It will be hard for the service not to include the 2022 slate without seeing considerable damage to its value perception. Consumers will be accustomed to spending $15 to have access to HBO, Max originals and Warner Bros movies, and having this removed could see an uptick in subscriber churn.
One possibility is that the base HBO Max premium tier will remain at $15 a month, but there will be a new “Movies Max” tier for an additional $10 that includes access to the theatrical titles. The availability on the service is another option that could see different pricing strategies.
Currently, Warner Bros. titles will have a limited availability for 30 days from the theatrical release, before being pulled from Max. Paying a premium to keep access is a feature to expect Warner Media focus groups explore in the coming months.