AT&T Inc.'s WarnerMedia struck a last-minute deal Wednesday to distribute its new streaming service, HBO Max, to Comcast Corp. customers just hours after it was launched.
As part of the deal, Comcast customers who already subscribe to HBO or HBO Now can now stream HBO Max at no added cost through the app or can sign up through Comcast.
AT&T had been racing to sign deals to distribute HBO Max before the launch, and an agreement with Comcast, the largest U.S. internet provider, was key.
But the new streaming service, which combines HBO with thousands of hours of TV shows and movies, remains unavailable to users of Roku and Amazon Fire TV, the two largest connected-TV platforms.
Roku, which is available in 40 million homes, said in a statement Wednesday that "we look forward to helping HBO Max in the future successfully scale their streaming business."
AT&T is investing billions of dollars in HBO Max, its first big entertainment venture since it spent $85 billion for Time Warner in 2018. The launch comes as millions of people are stuck at home, watching more video than ever. But many of them are also out of work and carefully watching their incomes.
"People are going to look at the price point first," said Steve Nason, research director at Parks Associates. HBO Max costs $15 -- the same as the HBO Now streaming service it's supposed to replace -- with discounts after the launch limited to some AT&T customers. It also has a one-week free trial. Other new streaming services such as Disney Plus and Quibi launched with cheaper prices and bigger discounts.
Entertainment companies such as AT&T's WarnerMedia are broadly shifting to streaming video, following in Netflix's wake, as more people drop their traditional cable bundles. Disney launched Disney Plus and the sports-focused ESPN Plus and took control of Hulu from an industry joint venture. Comcast's NBCUniversal is launching Peacock widely this summer. ViacomCBS is redoing CBS All Access, pumping it up with more programming.
Fox Corp. has its Fox Nation app. Apple, a tech company, started a small service of its own. Quibi, the short-video service targeted to cellphones, also hopes to get in on the streaming pie; it hasn't had much success yet.
"Maybe timing is actually good," said Wells Fargo analyst Jennifer Fritzsche. "There might be a Netflix exhaustion factor." Netflix has predicted extremely strong subscriber gains for this quarter.
But people will have to decide if it's worth paying up for a new video service on top of the "foundational" services many already have: Netflix; the heaps of video that come with Amazon Prime membership; Hulu; and, increasingly, Disney Plus, Nason said.
WarnerMedia has predicted 50 million U.S. subscribers by 2025, building on a base of 36 million current HBO customers, according to the research firm S&P Global. That number includes people who pay their cable company for the channel and the HBO Go app as well as those who subscribe to the HBO Now stand-alone streaming service.
WarnerMedia would like to convert those users to HBO Max, but there are contract issues that could antagonize customers.
"The confusion point is one we've obsessed over for a year," said Andy Forssell, the general manager of WarnerMedia's direct-to-consumer arm.
It's easy to prompt HBO Now users to switch to Max if they signed up directly through HBO, and many big cable companies have agreed to promote HBO Max to their existing HBO customers. But there's no deal yet with Roku and Amazon, so people who signed up for HBO through them won't easily have access to Max on a TV.
That's likely to be resolved, Nason predicted.
Another weak point for WarnerMedia is that the coronavirus pandemic has shut down Hollywood productions, and that's expected to slow down the rollout of HBO Max's original content, such as a highly anticipated Friends reunion special that was supposed to be ready for launch. But that will be felt more in 2021 than this year, Forssell said. Originals are important because they help draw in subscribers and get them to keep paying, month after month.
For AT&T, getting HBO Max right is critical. Its DirecTV satellite service is bleeding customers, and the traditional TV model is under threat from industrywide cord-cutting and, recently, a coronavirus-related advertiser retreat. AT&T owns TBS, TNT, CNN and other channels.
HBO Max also has the potential to entice wireless customers as AT&T offers it as part of a bundle. But the competition for customers' attention and dollars is fierce.
"They're going shoulder to shoulder with media titans," Fritzsche said. "They haven't played in that sandbox before."
Information for this article was contributed by Gerry Smith of Bloomberg News and Tali Arbel of The Associated Press.
Business on 05/28/2020