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Premium streaming services face 'instant accountability,' HBO Max exec saysPremium streaming services face 'instant accountability,' HBO Max exec says

The challenges of distribution have gotten easier in the direct-to-consumer streaming era, but subscriber retention has emerged as the big test, says HBO Max's Andy Forssell.

Jeff Baumgartner

June 3, 2021

5 Min Read
Premium streaming services face 'instant accountability,' HBO Max exec says

Premium content providers see direct-to-consumer streaming as a great way to reach more consumers, but that bigger, broader audience has more choice than ever before.

"The distribution has gotten pretty easy," Andy Forssell, EVP and GM of HBO Max, said Thursday at the Barclays Future of Media Conference. "What's hard is retention, because customers now have the big red button they can push at any time."

HBO Max and other streaming services that allow customers to come and go as they please face "instant accountability, which isn't comfortable all of the time," he said.

But being uncomfortable isn't necessarily a bad thing. "A lack of accountability means you cannot be a great programming and still have good economics awhile before it catches up to you," Forssell said. "That's not really good for anybody."

Still, it does mean that HBO Max and others need to analyze data and receive feedback from subscribers in near real-time, and use that information to promote shows and series that keep them engaged and coming back. The team at HBO Max likes to "obsess" over having a more direct relationship with the viewer and pair data with tools, like email and other types of notifications, to keep subs apprised of content that should be of interest.

"We pay attention to both wholesale and retail customers that are using our app. We know what they like. We know what they don't like. We know how often they come [to the service]," he said. "Wholesale customers (those who get HBO Max via a pay-TV operator, for instance) are slightly less engaged, but I think the gap is less than most people would assume."

HBO Max with ads should catch fire when 'content parity' is achieved

Forssell, an exec late of Hulu and Otter Media, also reiterated that the main driver behind this week's launch of an ad-supported, less expensive version of HBO Max is all about expanding the subscriber base, estimating that it's worth at least a 20% increase on top of the ad-free base.

"The basic concept behind an ad-subsidized version of an ad-free SVoD product is pretty simple: You're going to get to a larger market. The total addressable market's larger," he said.

On that point, he believes that Netflix, which doesn't offer an ad-supported tier, is likely "defining the ceiling on what full penetration in the US market is [for an SVoD service], and they're riding that up."

A good ceiling target for an SVoD service with multiple tiers (ad-free and ad-supported) should be in the range of 100 million-plus homes in the US, effectively the audience size that was being served during the "heyday of cable," Forssell said.

It's too early to know how many consumers are opting for HBO Max with ads, but there's hope that growth will accelerate once the content on both HBO Max service tiers sync up better. Early on, the ad-supported version of the service does not include the 2021 Warner Bros. movie slate that's premiering concurrently on HBO Max's ad-free tier and in theaters.

Forssell said there should be "content parity" between the HBO Max tiers by February 2022.

"I think that's when it [HBO Max with ads] really takes fire," he said. "I saw this during the early days of Hulu – people are comfortable with ads far more if they make the choice and say, 'Yes, I want this subsidization, I'll take the price break,'"

The drive toward scale and consolidation

Forssell also talked briefly about the proposed combination of WarnerMedia and Discovery, giving the nod to the inevitable consolidation of the media industry.

"In the very big picture, none of us should be surprised to see some consolidation," Forssell said. "I just think of it in the long term – 10-plus years, maybe even 15 – you're going to have a very small number of global services that have...300 to 400 million global subs...and thrive economically. What that number is, nobody knows, but it's a small number. and you're seeing that set up now."

For now, there are no big changes afoot at HBO Max, as the deal with Discovery isn't expected to close for about a year.

"From the team's perspective, nothing changes overnight," he said. "It's obviously huge news, but our mission today is the same as it was a couple of weeks ago." And that mission is squarely focused on using HBO Max to accelerate the growth of a premium subscriber base that has suffered during the ongoing decline of traditional pay-TV. So far, the base number is rising and expected to rise further as HBO Max gets launched to 60 international markets by the end of 2021.

WarnerMedia ended Q1 2021 with 44.2 million HBO Max and HBO subs in the US and has forecasted having 120 million to 150 million HBO Max subs (a number that includes both ad-free and ad-supported subs) by the end of 2025.

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About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Baumgartner, who previously had served as Site Editor for Light Reading Cable from 2007-2013, was most recently Senior Content Producer-Technology at Multichannel News, heading up tech coverage for the publication's online and print platforms, and was a regular contributor to Broadcasting & Cable, a sister publication to Multichannel News. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

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