In the ever-evolving streaming landscape, AT&T/WarnerMedia’s HBO Max recently announced plans to offer an ad-supported subscription model in Q2 2021.
Firm details on pricing for subscription tiers have not been released. However, the cost of the current commercial-free service is expected to drop as part of the new plan, with ad-supported subscribers paying an even lower rate. While commercials are not expected to appear in HBO first-run original programming, (the Emmy-winning Succession for example) we could see ads in HBO Max originals, as well as older HBO series, movies, and shows like Friends. Contracts are currently in place between HBO, the studios that produce content, as well as cable and satellite providers, that prohibit commercials in HBO original programming for an undisclosed period of time. Whether or not this restriction will change as HBO Max evolves remains to be seen.
Since its somewhat muddled launch in May of this year HBO Max currently reports 4.1 million users, well behind Netflix and Amazon Prime Video. The anticipated 2021 introduction of HBO Max into an already crowded ad-supported marketplace will give consumers one more option to choose from.
Wait a second… HBO Go, HBO Now, AND HBO Max? What’s the difference?
HBO Go (no longer a thing)
- Launch Date: 2010 (was discontinued on July 31, 2020)
- Price: Varied as it was part of the cable/satellite version of HBO (approx. $15/mo)
- Content Library: All current shows and movies on rotation on HBO, and most of the original series
- Ads? No
HBO Now (recently renamed as just “HBO”… original)
- Launch Date: 2015 (renamed “HBO” on July 31, 2020)
- Price: $14.99/mo
- Content Library: Same as former HBO Go and HBO cable/satellite
- Ads? No
HBO Max (now the golden child of HBO’s confusing streaming strategy)
- Launch Date: May 2020
- Price: $14.99/mo
- Content Library: Everything that was on Go and Now (i.e., now just “HBO”), plus additional original series, classic movies and TV, kids programming, and more
- Ads? Ad-supported tier coming in 2021
Ad-supported HBO Max will have between two and four minutes of commercials per hour. They are currently looking for a $250,000 spend per quarter from advertisers and setting CPMs around $80, which is similar to the rates for primetime broadcast television.
The move to offer an HBO Max paid option will allow AT&T/WarnerMedia the opportunity to go after more of the ad dollars being allocated to OTT streamers, as expenditures by advertisers have been steadily increasing year to year. eMarketer predicts U.S. OTT ad spend to hit $9 billion this year, up 28% from 2019. According to marketingcharts.com, 66% of U.S. homes with Wifi watch OTT video. And Comscore’s 2020 “State of OTT” reports that OTT viewing hours increased by 1.4 billion between April 2019 and April 2020. Much of that jump has been accelerated post-COVID. As stay-at-home orders went into place, OTT experienced extreme increases. Early March pre-COVID numbers had CTV households (an important subset of overall OTT viewership) spending 2.7 billion hours watching TV. CTV households rose by 48% to nearly 4 billion hours by early April. These CTV increases have boosted OTT consumption by nearly 40%.
HBO Max’s pivot to provide an ad-supported option is likely to become an increasing trend in 2021. Just this week, Discovery Networks announced their plans to launch Discovery+ in Q1 2021, which will feature both ad-free and ad-supported tiers. The increased competition among ad-supported OTT properties will benefit the consumer, as “Pricing Wars” could become a part of “Streaming Wars.” At some point, viewers may pare down their number of subscriptions and focus only a few streaming services that have earned their loyalty and provide more of the content they want to see. In addition to watching programming on their own schedules, streamers cut the cord to save money. Purchasing too many subscriptions will defeat the cost-saving goal of canceling cable TV.
Brands will certainly benefit from the ability to align their advertising with the premium content HBO is known for as HBO Max continues to produce original dramas, reality shows, and kids programming.