Over its nearly five-decade history, HBO has never run commercials. Now WarnerMedia, in a bid to maximize its streaming base, has rolled out a cheaper version of HBO Max with ads — $9.99 monthly, 33% less than the regular $14.99 no-ads plan. The company promises that it will feel as deluxe as any advertising can be, representing the lowest-clutter service pushing onto the streaming battlefield. Here are five key takeaways from its latest streaming play.
Is WarnerMedia at risk of tainting the HBO brand with advertising?
The company says it’s limiting commercial time to four minutes per hour of content (even lower than Peacock’s five-minute cap). Moreover, it’s not running ads in core HBO programming to remain consistent with the premium cabler’s heritage. JP Colaco, an ex-Hulu exec who is WarnerMedia’s head of advertising sales, says with a minimal ad load, consumers may actually watch more content and ads. “This is a centerpiece of the future of the rest of the company,” he says.
What upside does WarnerMedia expect?
The ad-supported version could increase the product’s market reach by 20%, according to HBO Max GM Andy Forssell. In the U.S., he expects it to hit more than 100 million homes, the kind of penetration that “we got to during the heyday of cable,” he said at a Barclays investment conference.
What’s excluded from HBO Max with ads?
Subscribers on the cheaper tier can’t download content for offline viewing or watch movies in 4K. Most significant, they will not get access to Warner Bros. films that debut in theaters and on HBO Max throughout 2021; those titles will come to all customers in a later window. By February 2022, Forssell expects content parity between the two U.S. tiers.
Why did it take a year after the initial HBO Max launch to introduce ads?
The heaviest lift was building a highly scalable system that could accommodate multiple plans with different features enabled or disabled, says Julian Franco, VP of product management for HBO Max with ads. “It took a lot of technical development to make that a global platform,” he says. Hammering out distribution agreements for the ad-supported service also came down to the eleventh hour, per Forssell: “A couple of those deals got done in the middle of the night as the software was going out.”
Is it still priced too high?
Even chopped down to $10 per month, HBO Max with ads is costlier than other ad-supported streaming plans, including Hulu ($5.99), Paramount Plus Essential ($4.99) and Peacock Premium ($4.99). WarnerMedia execs tout the 13,000-plus hours in HBO Max, but some observers think the ad-supported tier will be a nonstarter. “I have to believe consumers will look at that and say, ‘You are not giving me a deal — you are double-dipping,’” says Forrester media analyst Jim Nail.
