HBO Max - WarnerMedia Announces Upcoming Streaming Service (1 Viewer)

Radioguy41

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Looks to me like AT&T is simply slinging services up against the wall to see what'll stick. How many ways can you complete with yourself and expect to stay afloat? :rolleyes:
 
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NashGuy

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What I am wanting to know is what the price will be if you already subscribe to HBO. Also, if you are an AT&T customer (DirecTV, AT&T TV, AT&T TV Now), will there be a discount?

Here's what I think will happen: if you get HBO through an AT&T cable TV service (AT&T TV, DirecTV, Uverse TV, AT&T TV Now), they'll just automatically switch you to HBO Max for the same price. No more using the old HBO Go app for you, you'll use the HBO Max app instead. And all of HBO Max's on-demand content will get integrated (if technologically possible) into the on-demand menus of your existing cable/satellite box.

Also, as I've been predicting for months, I think all of their cable/satellite services will switch by the end of this year to a new set of channel packages (Plus, Max, etc.) for new subscribers, with each of those packages non-optionally including HBO Max. (Older packages, such as Choice, Xtra, etc. will be grandfathered for existing subs.) HBO Max will be the company's main focus, content-wise. They're not going to sell you *any* video services without it including HBO Max. You'll be able to get HBO Max standalone but nothing else (i.e. no cable channel packages) will be sold any more by AT&T without HBO Max included. HBO Max is the foundation on which everything else builds.

Where it gets tricky for AT&T is all those distribution relationships that they have with other TV operators like Comcast, Charter, Verizon, Cox, Altice, etc. Each of them already has in place a contract for distributing HBO at a given wholesale rate to their customers. I'm sure AT&T is talking to each of them and asking them to amend the contract to distribute HBO Max instead of HBO, or alongside it. The only way they could FORCE a given distributor to stop distributing HBO while a current contract is still in effect would be to kill HBO as its own separate product, but such a move would be FAR too risky for AT&T. The reason why a cable distributor might not want to replace HBO with HBO Max is that AT&T will likely want to keep a bigger cut of the retail price for themselves, i.e. charge a higher wholesale price for HBO Max than they do for HBO. (Think about it: they're going to offer way more content in HBO Max but charge the same $15 retail price. So they need to put a squeeze on the middleman.)

So what will distribution look like when HBO Max officially launches next spring? Who knows. We'll certainly see HBO Max offered direct-to-consumer; sign up online (at HBOMax.com or ATT.com) and let AT&T handle the billing, giving them 100% of your $15 monthly fee. That's their ideal scenario. We'll probably also see them allowing customers to sign up inside the HBO Max app on their Apple, Roku and Amazon devices too, which would put those app stores in charge of billing, allowing them to take up to a 30% cut of the $15 fee in the first year, dropping to 15% thereafter. (This is the public policy for Apple and Google's app stores, although for such a huge service, they likely have to negotiate a lower cut in order for the service to allow in-app sign-ups rather than forcing sign-up and billing via their own website, as Netflix now exclusively does.)

But when it comes to distribution of HBO Max via those traditional cable TV operators, it could be a mess. Maybe Comcast sells HBO Max for $16 and drops the price of HBO to $13. Meanwhile Charter continues to sell only HBO at the current $15 price, leaving them exposed to the risk that many of those customers will cancel HBO from them and sign up for HBO Max as a standalone streaming service for the same $15 price, completely cutting Charter out of the loop. Verizon, meanwhile, might simply convert all their existing HBO subscriptions over to HBO Max and charge the same $15 price but exclude HBO Max from their current premium bundling discounts which HBO qualifies for (along with Showtime, Starz, etc.) Who knows. Availability and pricing of HBO Max and HBO could vary from one cable operator to another.

I also suspect that AT&T is going to completely kill Cinemax as an ongoing service/brand once HBO Max launches too. And CBS has already put out an unsolicited bid to buy Starz, so I expect that deal will happen in the coming months, with Starz (and maybe after that, Epix) swallowed up by CBS's longstanding premium service Showtime to make it a bigger service with more content. In a couple years, all that may be left of "premium cable TV services" would be HBO Max and Showtime (and ironically, Showtime will be available as an add-on inside the HBO Max app, and via lots of other services too.) But that's another story...
 
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Zookster

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Isn't HBO Max essentially an a OTT platform for cord cutters? Why would cable operators offer it as an advertised add-on service anymore than they would promote and sell Hulu? I could see AT&T merging HBO Now/Go with Max and "being nice" and allowing cable customer login to access all the Max content. But I don't see cable companies encouraging people to sign up for "HBO Max" in lieu of just HBO. My local cable operator, Cox, already charges $16/mo for just HBO. I don't see them lowering prices for anything anytime soon unless they are completely compensated for price changes by AT&T.
 

NashGuy

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Isn't HBO Max essentially an a OTT platform for cord cutters? Why would cable operators offer it as an advertised add-on service anymore than they would promote and sell Hulu? I could see AT&T merging HBO Now/Go with Max and "being nice" and allowing cable customer login to access all the Max content. But I don't see cable companies encouraging people to sign up for "HBO Max" in lieu of just HBO. My local cable operator, Cox, already charges $16/mo for just HBO. I don't see them lowering prices for anything anytime soon unless they are completely compensated for price changes by AT&T.

I think HBO Max will be *most* attractive to cord-cutters since it will give them access to current stuff from TBS, TNT, CNN, Cartoon Network, etc. that they otherwise wouldn't have without a cable subscription. Cable subscribers will largely shrug at that (just as they probably largely shrug at Hulu's next-day access to shows from ABC, NBC and Fox.)

But HBO Max will *also* contain exclusive content that isn't part of regular HBO or any other cable channel: the new line of "Max Originals" series and movies. And they're really ramping up the spending on Max Originals, with some big names attached. Google around and see. So I do think that a lot of cable TV subscribers, especially those who are already have regular HBO, would be interested in having HBO Max in addition to their basic channel bundle (and in place of regular HBO).

OK, just as a hypothetical illustration, let's say that HBO struck its current distribution deal with Cox a couple years ago and it doesn't expire until the end of 2021. An industry analyst I read somewhere said that, on average, HBO charges their cable partners a wholesale rate of only about $7.65 per sub. Cox is kinda small, so let's assume they couldn't negotiate quite that good a rate and instead landed on a wholesale price of $8 per sub. As you say, Cox charges a regular a la carte price of $16, although when you factor in that they give it away for some months here and there as a customer retention bonus, and maybe sell it at a slight discount as part of a "Platinum" bundle or whatever, maybe they actually take in an average of $13.50 per month on it. After paying $8 per sub to HBO, that leaves them with $5.50 per sub, which is about a 41% share of the revenue. That's a lot. (BTW, the retail prices for HBO are set by the cable operator, not by HBO, although HBO may set certain rules that it cannot be priced below a certain level. For instance, you never see HBO priced below other premium services. But different operators do charge different prices for HBO. Cox charges $16, Comcast charges $15, DirecTV charges $18.)

Now consider that the *stated* revenue cuts that Apple's App Store and Google Play take for subscription services sold and billed through them is 30% in the first year, then 15% thereafter. That's a whole lot less than 41%. And while I'm sure Apple and Google stick to those policies for most service providers, it's certainly possible that the big boys, like Disney, AT&T/HBO, etc. are able to negotiate lower rates than that. Because streaming services can always follow Netflix's recent lead: stop allowing sign-ups at all through its app and instead require you to go to Netflix.com and get billed directly by Netflix. That way, Netflix gets 100% of your monthly subscription fee. (Well, they have to give a tiny bit to the credit card company for processing.)

AT&T is adding a lot of additional content to HBO Max versus what they offer in regular HBO. So you would expect them to charge a much higher price. Except they can't because Netflix. And Disney+. And other streaming competition. Which is why the latest scoop says they're going to aggressively price HBO Max at $15, the same as HBO Now, when it launches next spring. It must be a little painful for AT&T to increase content spending (while cannibalizing their basic cable channels too) on their big new streaming service but not charge any higher price for it. But AT&T understands that "No pain in the short term means no gains in the long term". The streaming wars are entering a new, much more competitive phase now and it's an all-out race to build up subscribers bases in order to be one of the giants left standing in the end.

OK, now back to Cox. Let's say that right now, AT&T is in talks with them. What might they be saying?

"Hey, we know that we're contractually obligated to let you continue selling HBO to your subscribers at a wholesale rate of $8 per sub through the end of 2021. But this new HBO Max is going to be a really compelling service and we're going to price it, for folks who sign up and bill through us, at only $15 per month. Of course, we get to keep that whole $15. And we're gonna advertise the hell out of this thing so that folks understand the value proposition. It'll even offer 4K HDR, unlike our regular HBO service. And we'll put live streams of the HBO, HBO Latino and HBO Family linear channels inside the HBO Max app too. So we think that a lot of your HBO subscribers will drop that service with you and switch to HBO Max directly from us. For the same money, they'll get a way better service. Only annoyance for them would be that it's not on their Cox cable box."

"Now, if you're up for it, we're happy to amend our current distribution contract with you so that you sell HBO Max instead of regular HBO. You'll keep the HBO linear channels and you can integrate all the HBO Max content into your Cox on-demand platform for subscribers, plus give them access to the separate HBO Max app too. But we're just gonna have to raise our wholesale price from $8. Maybe we could sell it to you for $11 per sub through the end of 2021 and then we'll renegotiate the contract then (when, by the way, we're going to have to significantly increase our wholesale price). If you sold HBO Max for the same $16 to your subscribers as you sell HBO right now, and only sold it a la carte (not part of any discounted bundled) and stopped giving it away like candy to keep loyal customers, then you'd be making $5 per sub, only 50 cents less than you do now on regular HBO. And $5 divided by $16 equals a 31.25% cut of the revenue, which is still more than Apple, Google, Roku and Amazon are getting. Whaddya say? Do you want to join the future with HBO Max or try to keep selling old-style HBO for the remainder of this contract period? By the way, when this contract is up, you won't have the option of selling regular HBO come 2022. Your only option will be HBO Max."

What would Cox do? If they said, "No thanks, we'll keep the current contract as-is," how many of their HBO customers would cancel and switch to HBO Max? That's lost revenue for Cox. Cox might respond by lowering their price of HBO to maybe $12 or $13 per month but that would be coming completely out of their profit margin. Even if they ceased all bundling discounts and give-aways of regular HBO, so that the a la carte price was the true average fee per sub they took in, at a retail price of $13 and a wholesale price of $8, Cox's margin would go down to $5 per sub, which is the same as what AT&T was offering as the margin for HBO Max. Meanwhile, some Cox customers would still cancel HBO and switch to HBO Max as a $15 standalone streaming service. For another $2 per month, they'd be getting 4K HDR and all those Max Originals, even if they did have to switch over to their Roku to watch.

Now, I'm obviously not privy to all the contractual details involved but if my figures and logic are in the ballpark, you can see why most cable operators would realize that they had no good option but to accept the fact that they're going to get squeezed as a middle-man distributor of HBO and they may as well switch to distributing HBO Max instead.

And, in a way, this is an encapsulation of what is happening with cable TV overall. There's less and less money to be made by distributing other companies' content. The power is shifting into the hands of a few large content owners, who have the power to go direct-to-consumer via the internet. In the pre-broadband era, cable companies played a useful role because the content owners (i.e. broadcast and cable networks) needed someone with a physical delivery infrastructure to get their content onto consumers' TV screens. But when cable operators became broadband operators too, they were essentially allowing anyone to access their delivery infrastructure (as long as they embraced internet protocol), making them increasingly superfluous as TV service middlemen. Some key content -- mainly live sports -- remains trapped inside the cable channel bundle. But that will slowly change. And as it does, the entire cable TV model will collapse. Of the current broadband operators, the only ones I suspect will still be selling their own cable TV service in any major way in 5 years will be AT&T and Comcast. Why? Because they own, respectively, WarnerMedia and NBCUniversal. All the others -- Charter, Verizon, Altice, Cox, Frontier, etc. -- will have gotten out of the game. They'll just redistribute internet streaming services for a small finder's fee, like Verizon has begun doing with Google's YouTube TV.
 

NashGuy

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Mar 24, 2009
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P.S. I suspect that another bit of leverage that AT&T/WarnerMedia may be bringing to these negotiations with cable operators for distribution of HBO Max is this: "By the way, we've decided to shut down our Cinemax service when HBO Max launches. Even though our distribution contract with you for Cinemax may still be in effect, the contract doesn't preclude us from completely shutting it down. The original series and movies that make up Cinemax will still be available though, but exclusively within the HBO Max on-demand library. For those current Cinemax series like Jett that we decide to keep making, we'll just rebrand them as "Max Originals". Cinemax just makes no sense as a standalone brand for us any more, given our strategy shift to HBO Max. We know that your current Cinemax subscribers (most of whom are also HBO subscribers) may be disappointed to hear this news but we think they'll all happily switch over to HBO Max, which will be a much better value for them. We intentionally put the word "Max" right in the name of the new HBO Max service so that Cinemax subscribers will understand what's going on."
 

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