Ad-supported HBO Max to fetch $9.99/month – report

An ad-supported variation of WarnerMedia's HBO Max streaming service will launch at $9.99 per month, $5 less than the current, ad-free offering, CNBC reported.

WarnerMedia has yet to announce pricing or a specific launch date for the ad-supported HBO Max service, which is expected to debut sometime in June. Earlier this month, AT&T CEO John Stankey suggested that the company will use its prepaid wireless sales channel to help drive sales of the new ad-supported HBO Max service.

CNBC points out that WarnerMedia CEO Jason Kilar has said the plan is to limit ads to content that's exclusive to HBO Max, and reports that HBO Max scrapped a preliminary idea to sell an ad-supported version of HBO Max for just $4.99 per month.

A partially ad-fueled form of HBO Max should help to expand the market for the streaming service, which debuted last May, and perhaps draw in customers who aren't willing to shell out $14.99 for an ad-free HBO Max experience. It might also force Netflix, whose standard service costs $13.99 per month, to consider cheaper, ad-supported alternatives.

AT&T-owned WarnerMedia ended Q1 2021 with 44.2 million HBO Max and HBO subs in the US, and has set a plan to launch HBO Max in 60 international markets by the end of 2021. AT&T expects to have 120 million to 150 million HBO Max subs (via a blend of ad-free and ad-supported subs) by the end of 2025.

Adding ads to the mix will be a new angle for an HBO-branded service, but will follow a path already taken by Peacock. The NBCU-owned streaming service, which now has 42 million signups so far, markets three options – a completely ad-free version for $9.99 per month; an ad-supported premium tier for $4.99 per month; and a completely free, ad-based version with a smaller content library and access only to the first two seasons of The Office.

Pay-TV pushback

WarnerMedia's initial HBO Max strategy has centered on converting existing HBO customers to the new service, including those that get HBO through pay-TV distributors, with a smaller focus on direct sales of HBO Max as a standalone service. However, the company is expected to ramp up direct-to-consumer sales of the standalone product, viewing that as critical to the new streaming service's business model as it expands internationally.

CNBC said some pay-TV distributors aren't thrilled with AT&T's decision to sell HBO Max under an ad-supported model, as it stands to reduce their cut of HBO Max subscriptions that they sell. However, a lower cut of the wholesale revenue could be countered by the ability for pay-TV distributors to sell some ad inventory on HBO Max, the report said.

Related posts:

— Jeff Baumgartner, Senior Editor, Light Reading