HBO Max Launches — With More Than 10,000 Hours of Content

WarnerMedia’s much-hyped subscription streaming video service, HBO Max, launches today (May 27) as the most-expensive over-the-top video platform ($14.99) and last to join a crowded SVOD market dominated by Netflix, Amazon Prime Video, Disney-owned Hulu and Disney+.

“Today we are proud to introduce Max — a dream that was created and nurtured by an incredible team of talented executives who dedicated the last year-and-a-half to making it a reality for consumers nationwide,” Bob Greenblatt, chairman of WarnerMedia Entertainment and Direct-to-Consumer, said in a statement.

The service, which will include a less-expensive ad-supported option, bows with more than 10,000 hours of content targeting as wide an audience (kids included) as possible — unlike traditional HBO, HBO Go or HBO Now.

Among the movies featured on the new service: all eight films in the “Harry Potter” franchise.

“There’s got to be more frequent [viewer] engagement,” John Stankey, who will soon succeed Randall Stephenson as AT&T CEO, said during Max’s media unveiling last October.

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That means HBO’s “True Detective” and “Game of Thrones” viewership has to expand to include families seeking libraries of Looney Tunes, Merrie Melodies and Hanna-Barbera content, in addition to re-runs of “Friends,” which WarnerMedia paid $425 million to itself (Warner Bros. Television) for exclusive streaming rights. A big-budget reunion special episode was put on hold due to the coronavirus pandemic shuttering production.

Backed by a $4.8 billion war chest over the next several years (relatively small compared with Netflix’s reported $17 billion spend this year alone), with plans to secure 50 million subscribers by 2025, Max is setting itself a high bar for achievement — or failure.

Max is also appealing to DC comics fans with pledges to release every “Batman” movie on the platform, in addtion to Aquaman and Wonder Woman, among others. This strategy puts Max at odds with DC Universe, the $8 monthly streaming service that features a slew of original series. Currently only “Doom Patrol” is migrating over to Max.

“The competition is actually more about content than anything else, and whatever’s on Max is not going to be available to Netflix or Disney+,” said Michael Pachter, media analyst with Wedbush Securities in Los Angeles.

Pachter contends that with the HBO brand already available to about 140 million households, it’s just a matter of time before a percentage of them migrate. Max is now available to existing HBO and HBO Now subs at no extra cost.

Pachter said the only question is how many households will keep pay-TV in a global recession due to the coronavirus pandemic.

“My guess is that conventional HBO loses a lot of subscribers (probably 5 million) over the next year or so, while Max adds two to three times that many, so net, they probably grow from 140 million to 150 million subs,” he said.

Indeed, HBO Now direct-billed subs, as well as those who are billed through Apple, Google Play, Samsung, Optimum and Verizon Fios Internet get access to Max at no extra cost, with the Now app automatically updating to the Max app on supported devices.

Current HBO subs who are direct-billed through AT&T, AT&T TV, DirecTV, AT&T U-verse TV, Cox, Hulu, Optimum, Spectrum, Suddenlink, Verizon Fios TV and select independent cable, broadband, and telco providers through the NCTC like WOW!, Atlantic Broadband, RCN and MCTV, among others, also have access to Max at no extra cost.

All that is required is downloading the Max app and then electing to access the service on supported devices or via desktop and log in using an existing provider’s username and password.

Notably missing from Max’s debut: distribution via Amazon Fire TV (and Amazon Prime Channels) and Roku — the latter with more than 40 million subs. The platforms have traditionally been key for third-party OTT launches — including HBO Now, which generated much of its 8 million sub base through Amazon and Roku.

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Amazon and Roku typically take a cut of subscription revenue, in addition to keeping control of user data, among other conditions.

“While we don’t typically comment on specific deal terms or negotiations, the fact is that in this instance while we believe that HBO Max would benefit greatly from distribution on Roku at launch, we do not currently have an agreement in place,” a spokesperson for the streaming media device manufacturer told Lightshed Partners’ Richard Greenfield earlier this month.

“These guys are going to divide up the [pay-TV] world … I expect some to count ‘only’ domestic subscribers [in the beginning], so it’s going to be noisy,” Pachter said.

Home Entertainment ‘Social Distancing’ — Boon or Double-Edged Sword?

With movie theaters shuttered and government officials calling on people not to congregate in groups larger than 10, home entertainment, including transactional VOD and packaged media, is getting a boost from consumers sequestered at home during the spread of the coronavirus pandemic.

Universal Pictures said it is releasing select theatrical titles concurrent with home entertainment following a weekend box office that saw its five releases generate a paltry $11.7 million in collective ticket sales.

Warner is putting Harley Quinn: Birds of Prey early into digital retail channels. It’s not a big gamble considering the movie has been out in theaters since Feb. 7.

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“Yes, they will see increased usage in home entertainment distribution,” said Michael Pachter, media analyst with Wedbush Securities.

While no studio is going to admit it might profit from home-confined consumers, Wall Street analysts are less concerned about optics and more motivated by trends and cost/benefit analysis, among other factors.

Pachter cautions that any uptick in transactional purchases, Redbox rentals and subscription streaming is limited in its “attractiveness” as investments. Indeed, after Universal and Warner, no other studio has announced expediting retail channels. Box office king Disney has heretofore resisted altering the theatrical window for obvious reasons.

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“There are other things going on out there that limit their attractiveness as investments,” Pachter said.

Home entertainment spending in the fourth quarter of 2019 increased 9% to $6.8 billion, from $6.3 billion spent in the final three months of 2018, according to DEG: The Digital Entertainment Group.

The analyst contends any increased revenue studios make from DVD will be “far less” than the “normal” revenue they would generate from theatrical exhibition. A noted Netflix bear, Pachter says the SVOD behemoth remains an overvalued stock, “but less so now due.” He says Disney will benefit from releasing its movies on Disney+, but will still “lose mightily” on theme parks and cruise ships — both of which are shut down.

“Redbox definitely benefits, but it’s a private company,” Pachter said. The kiosk vendor and its former corporate parent, Outerwall, were acquired by a private equity group in 2016 for $1.6 billion.

Richard Greenfield, media analyst with Lightshed Partners, said the elimination of live sports on TV makes SVOD a valuable alternative.

“To the extent consumers are increasingly working from home and refraining from out-of-home activities, without sports to watch on TV, we suspect streaming services such as Netflix will see increased subscriber additions and higher utilization per account (leading to higher ARPU plans that enable more users per household and lower churn),” Greenfield wrote in a March 12 note.

Analyst Laura Martin with Needham was one of the first Wall Street pundits to predict a home entertainment gold rush as a result of the pandemic. Martin cautions that with the pandemic now centering in Europe, international  Netflix subscriber growth will stall.

“In distressed times, people will give up their Netflix subscriptions,” Martin wrote in a note.

Greenfield disagrees.

“Netflix appears incredibly well-positioned to entertain consumers as [other] entertainment options dry up, especially if more movie theaters close globally,” he wrote.

 

NBA TV Ratings Down 15% as League Pushes Streaming Access

With several marquee players absent due to injury, the National Basketball Association’s 2019-20 season is off to an inglorious start.

NBA games on national TV drew an average of 885,000 viewers in the first eight weeks of the season, according to The Wall Street Journal, in contrast to 1 million during the previous-year period and 1.2 million two years ago.

The league cites a rash of injuries to big name players such as Kevin Durant, Stephen Curry, Klay Thompson and Zion Williamson for the downturn. Indeed, without Curry and Thompson, the former champion Golden State Warriors are dead last in the Western Conference with just nine wins.

Media analysts such as Rich Greenfield with Lightshed Partners contend viewers are diminishing for other reasons such declining pay-TV and increasing content alternatives.

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“There is no doubt that the talent in any season can push ratings up or down, but everyone is fighting a very, very difficult underlying trend, which is less people subscribing to TV,” Greenfield told WSJ. “And of the people who are subscribing to TV, they’re watching less and less every day.”

The NBA for the first time is selling its NBA TV streaming service without a requisite pay-TV contract. NBA TV, which affords subscribers live access to out-of-market games, costs $6.99 monthly or $59.99 annually.

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Launched in 1999 as a 24-hour cable channel, NBA League Pass began offering streaming video access to select games in 2006. It became available on Dish Network’s Sling TV online platform in 2018.