HBO Max Price Will Head Due “North” When It Combines With Discovery+ Next Spring, Warner Discovery Streaming Czar JB Perrette Says; Ad Load On Cheaper Tier Could Also Double
By the time HBO Max merges debuts next spring as a fortified offering encompassing Discovery+, it will have gone three years without any adjustments to its price or the ad experience on the cheaper subscription tier. Get ready for that to change, with Warner Bros Discovery streaming and games CEO JB Perrette indicating prices will head “north” and the ad load could potentially double from its current level.
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With a $15 monthly price point since its launch in May 2020, HBO Max has remained stable as rival services have risen in cost, though discounts have periodically been dangled for consumers. In June 2021, HBO Max with Ads a $10-a-month version with advertising made its debut. In reporting lackluster third-quarter results today, Warner Bros. Discovery said the combined direct-to-consumer subscriber base, across HBO, HBO Max and Discovery+ (which has been live since January 2021) reached 94.9 million.
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During the company’s quarterly earnings call with Wall Street analysts, Perrette, addressed pricing and other aspects of the HBO Max-Discovery+ combo, which is now due in spring 2023, earlier than previous forecasts of summer.
Perrette was unequivocal in predicting that prices will head “north,” saying the company sees an increase as “an opportunity, particularly in this environment,” as inflation grips the world economy and other streaming players (even Apple) jack up rates. HBO Max at launch was the priciest offering in the U.S. market, and was encumbered by longstanding “most-favored nation” limitations on undercutting prices agreed upon with longtime HBO distribution partners like cable and satellite providers. Then, several months ago, Netflix leapfrogged it in the U.S., raising the price of its most popular offering to $15.49.
While Perrette and his colleagues didn’t offer any precise guidance on pricing or details about subscription tiers during the call, they didn’t sound like they’d be shy about making aggressive moves (especially given the company’s challenged financial shape). Perrette noted that by blending Discovery+ with HBO Max, two more specialized offerings are becoming something of interest to an entire household, theoretically making it a better value for the money.
Advertising is another key area of emphasis within the broader WBD streaming effort. Given that the company estimates a potential audience of 2 billion people across all free, ad-supported platforms globally, and the fact that an increasing number of U.S. players have gone to an “ad-light” offering, Perrette said HBO Max with Ads will continue to be a strategic focus. The company has yet to break out any subscriber numbers or other metrics for the ad-supported version, and Perrette indicated that it hasn’t seen much trade-down by subscribers to the ad-free version. “We were frankly a little surprised in the HBO Max ‘ad-light’ offering that more people have not moved to that offering,” he said. “I think it says two things, which are both positive for us. No. 1, we believe there’s actually some pricing advantage for us on the ad-free service, that we can probably move north of where prices are today, and secondarily that we can drive — particularly as we bring the products together — a lot more adoption of that ‘ad-light’ tier, as we saw with the legacy Discovery+ product.”
The other upside, he continued, is “monetization” from selling more ads. “Today, we have two to three minutes of ads on HBO Max ‘ad-light,’ about half of what we have on Discovery+, so as we roll out the new combined products, we have almost 100% growth of new inventory available to us as we look to combine the ads of those two products.”
Internationally, Perrette also noted that the average revenue per user that the company gets from wholesale and retail subscriptions is “meaningfully lower than the market leaders. For us, that spells opportunity” as the company mulls pricing strategies.
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