AT&T's SVoD Service to Cost More Than Disney+, Says Analyst

AT&T's WarnerMedia still hasn't revealed pricing and other key specifics for its coming subscription VoD service, but one top industry analyst believes that it will be priced well above Disney+, the much-ballyhooed direct-to-consumer offering set to debut November 12 for $6.99 per month.

Regarding WarnerMedia's coming SVoD service, "We expect a price point above Disney+, and perhaps quite significantly so," MoffettNathanson noted in a report issued Wednesday, based on a recent get together with John Stankey, CEO of WarnerMedia.

The report said Stankey believes the pricing for Disney+ reflects AT&T's view that Disney's new direct-to-consumer streaming service will deliver a narrower content slate than what WarnerMedia has in mind for its new offering.

Fitting between Disney+ and Netflix
WarnerMedia hasn't named the new service, but has said that HBO will be featured prominently and be surrounded by content from Warner Bros. and Turner. Nathanson expects HBO to be included in the brand of the new offering, which will try to wedge itself between the "all you can eat" focus of Netflix and a more "quality-oriented" service from Disney+.

"WarnerMedia’s SVOD goal is to be placed squarely in the middle between Disney and Netflix, with more content tonnage than Disney’s initial launch but higher average quality than Netflix," the research firm explained.

MoffettNathanson believes that WarnerMedia has a library that can support that focus, noting that the company, prior to the Fox-Disney merger, had 21% of the 200 most popular films and 18% of the 100 highest-rated TV series.

But there appears to be a shift in WarnerMedia's original thinking about how it would package its new direct-to-consumer subscription offering. Rather than coming out with a three-tiered SVoD service, the initial offering from WarnerMedia "appears to be a single tier product," the analyst added. Last November, the company outlined a plan to offer three services: an entry-level offering with movies, a premium tier with unique original programming and more theatricals and another that bundled together the first two alongside a deeper content library.

Based on the conversation with Stankey, MoffettNathanson's analysts also expects WarnerMedia to release a "2.0" version in its second year that includes an advertising-based component to help the service reach a consumer segment that doesn't want to pay the full freight for yet another VoD service. On that point, they note that Hulu's VoD offering features a commercial-free plan for $11.99 per month alongside a version with limited commercials for $5.99.

Rebalancing the business
Luring subs will be a priority when WarnerMedia launches its SVoD service -- a beta version is expected to debut in Q4 2019, followed by a full-scale launch in Q1 2020. However, WarnerMedia, like Disney, will also have a significant business challenges to overcome, namely the forgoing of some lucrative licensing revenue that's on the books today.

That will prove a tough balance as AT&T and WarnerMedia attempt to add subs for the new SVoD offering without cannibalizing AT&T's pay-TV services and HBO's traditional premium products. AT&T has already made it clear that it will hedge its bets a bit, as it intends to complement its new direct-to-consumer SVoD offering with agreements with pay-TV distributors.

"And to the extent that any new DTC SVOD service will only accelerate the decline of traditional distribution, AT&T will suffer faster defections not only from DirecTV but also from the Turner Networks," MoffettNathanson surmised. "Such is the dilemma for a company with positions in every corner of media and distribution."

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— Jeff Baumgartner, Senior Editor, Light Reading

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