By the time HBO Max debuts next spring as an enriched offering encompassing Discovery+, it will have gone three years without any adjustments to its price or ad experience on the lowest subscription tier. Prepare for that to change, with JB Perrette, CEO of Warner Bros. Discovery’s streaming and gaming, indicating that prices will head “north” and the ad load could potentially double from its current level.
With a monthly price of $15 since its launch in May 2020, HBO Max has held steady as competing services have increased their costs, although discounts have periodically been suspended for consumers. In June 2021, HBO Max with Ads, a $10 per month version with advertising, debuted. 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 online since January 2021) reached 94.9 million.
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During the company’s quarterly earnings call with Wall Street analysts, Perrette touched on pricing and other aspects of the HBO Max-Discovery+ combo, which is now slated to arrive in spring 2023, earlier than expected. earlier in the summer.
Perrette was unequivocal in predicting prices will head “north”, saying the company sees a rise as “an opportunity, especially in this environment”, as inflation grips the global economy and d other streaming players (even Apple) are raising rates. At launch, HBO Max was the most expensive offering in the U.S. market and was hampered by longstanding “most favored nation” limitations on price undercutting agreed to with longtime HBO distribution partners. such as cable and satellite providers. Then, several months ago, Netflix overtook it in the US, raising the price of its most popular offering to $15.49.
Although Perrette and his colleagues didn’t provide any specific pricing or details on subscription levels during the call, they didn’t seem to hesitate to take aggressive action (especially given the dire financial situation of the company). Perrette noted that by mixing Discovery+ with HBO Max, two more niche offerings become something of interest for an entire household, theoretically making them better value for money.
Advertising is another key area as part of WBD’s broader streaming effort. Given that the company estimates a potential audience of 2 billion across all free ad-supported platforms globally, and the fact that a growing number of US gamers have opted into an ‘ad-light’ offering , Perrette said HBO Max with Ads remains a strategic focus. The company has yet to break down subscriber numbers or other metrics for the ad-supported version, and Perrette said she hasn’t seen much compromise from subscribers on the free version. advertising. “We were frankly a bit surprised by HBO Max’s ‘ad-light’ offer that more people didn’t switch to that offer,” he said. “I think that says two things, both of which are positive for us. #1, we think there’s actually a price advantage for us on the ad-free service, that we can probably move north of where the prices are today, and secondarily that we can drive – especially when we bring the products together – much more adoption of this ad-light level, as we saw with the former Discovery+ product. »
The other benefit, he continued, is the “monetization” of selling more ads. “Today we have two to three minutes worth of ads on HBO Max ‘ad-light’, about half of what we have on Discovery+, so as we roll out the new combos we have growth of nearly 100% of new inventory available to us as we seek to combine advertisements for these two products.
Internationally, Perrette also noted that the average revenue per user the company derives from wholesale and retail subscriptions is “significantly lower than market leaders. For us, this represents an opportunity,” as the company considers pricing strategies.
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