HBO Max Will Need to Rely on Expansive Library to Overcome Branding Problems – Analysts

The 10,000 hours of content in WarnerMedia's library at launch could overcome the service's steep price point.
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Wall Street analysts are largely optimistic about AT&T’s big-money foray into the streaming market, and believe the library of content on offer from HBO Max will present a significant challenge to Netflix’s domination of the space.

HBO Max, which will launch in May 2020 for $14.99 per month, will launch with 10,000 hours of content spanning AT&T’s numerous brands. Popular films and television shows from Cartoon Network, CNN, DC, New Line, TNT, TBS, and Warner Bros. will find streaming homes on HBO Max, and the service will also put out 31 original series during its launch year. It will be the most expensive streaming service on the market by a considerable margin—a standard Netflix subscription is $12.99 per month, while a month of Apple TV+ and Disney+ is only $4.99 and $6.99, respectively—but analysts generally concur that subscribers will be getting their money’s worth.

Wedbush analyst Michael Pachter argued that HBO Max being more expensive than Netflix was irrelevant, as the former service will take advantage of AT&T’s large film catalogue and will bolster its offerings with hit television shows such as “Friends,” “South Park,” and “The Big Bang Theory.”

“HBO Max is better than Netflix because of the movies, all content from Warner Bros., Universal, and Fox over the prior 8 years, and has managed well at that price point,” Pachter said in an email. “Adding all Warner library and a lot of second window TV makes the value even greater, and I don’t think it’s an impediment to their potential for growth.”

Even with its vast content library, HBO Max won’t be lacking for competition. The reigning streamers, such as Netflix and Hulu, aren’t going anywhere, and newer services like Apple TV+ and Disney+ have their own perks and highly-anticipated originals that could help them carve off their own slices of the streaming market. There’s no doubt that HBO Max will enter the market during an unprecedentedly cutthroat era for streaming television and by the time it releases, Apple and Disney’s streaming services will have had several months to bulk up their content libraries and attract subscribers.

Although Edward Jones analyst Dave Heger compared HBO Max favorably to Apple TV+ due to the lack of preexisting brand awareness for the latter’s original content, he noted that Disney+ had the advantage of more recognizable films and television shows.

“Disney has the advantages of a lower price point and more immediately identifiable content,” Heger said. “HBO Max will have all the HBO content but I don’t think people are as familiar with what movie studios put stuff out over time, while Disney has a distinct brand. I wouldn’t expect the ramp in subscribers that I expect for Disney+ due to the combination of the high price point and the confusion over what HBO Max means compared to HBO Now and HBO Go.”

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“Gossip Girl” is one of several popular franchises that is getting rebooted on HBO Max.Andrew Eccles/Cw Network/Kobal/REX/Shutterstock

WarnerMedia didn’t offer a wealth of new information about HBO Max’s original projects during Tuesday’s event. The company had already announced projects such as “Tokyo Vice” and the “Gossip Girl” spinoff, and “Game of Thrones” prequel “House of the Dragon” isn’t being marketed as an HBO Max exclusive. Still, a handful of Hollywood power players, including JJ Abrams and Kaley Cuoco, have overall deals with WarnerMedia and are expected to produce several projects for HBO Max, which should help the streaming service in the long-term.

The lack of new information about the streaming service’s original films and television shows didn’t bother investors, but the convoluted early marketing for HBO Max was a key issue for both Heger and Pachter. HBO Max will exist alongside the linear HBO channel, the standalone HBO Now on-demand streamer, and HBO Go, the on-demand service for cable subscribers. WarnerMedia operates a confusing array of similar-sounding services and the early promotional deals for HBO Max aren’t simplifying things: Customers that subscribe to HBO through the AT&T-owned DirecTV or AT&T TV Now will get HBO Max for free, but other kinds of HBO subscribers will apparently be out of luck.

“They made the service pretty confusing, since it’s at the same price (as HBO Now),” Pachter said in an email. “It’s ‘free’ for ATT Mobile and DTV customers, but it’s really confusing if you’re a Comcast customer who pays for HBO and is going to be denied access…Ultimately, they will give it away to enough people that word of mouth will be good enough to drive growth, and they clearly need to just switch over to Max as the lead service and phase HBO out altogether.”

WarnerMedia can’t axe its other HBO-branded services or strip their content for HBO Max due to technical hurdles and the company’s various broadcasting contracts, but WarnerMedia CEO John Stankey made mentions of “replatforming” and transitions, so it is possible that things could change in the years ahead.

As for HBO Max at launch, investors are nonetheless pleased that the streaming service is positioned to compliment the other HBO offerings.

“The content contained within HBO Max clearly targets Generation Z/Millennials and kids and families, which we believe is a welcome addition given HBO’s historical skew towards slightly older audiences,” J.P. Morgan managing director Brian Turner wrote in a note to clients.

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