HBO Max Will Sell a Lower-Cost Tier With Ads for $10 a Month

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HBO Max with commercials will cost $9.99 a month, a bet that the streaming platform can reach more subscribers at a lower price and make up the difference with ad revenue.

The lower-priced tier will launch in the first week of June, HBO Max’s parent, AT&T Inc.’s WarnerMedia, said Wednesday. Consumers can still choose the ad-free version at $14.99 a month.

The two services will have similar programming, but subscribers who get the lower-cost version won’t have access to Warner Bros. films that debut in theaters and on HBO Max on the same day.

HBO Max will have limited commercials, the company said, and advertisers will be able to reach viewers in ways they can’t on traditional TV. The service won’t air ads during HBO original series.

HBO Max is wading into a crowded field of streaming services that are all trying to capture streaming viewers and, in some cases, ad dollars. Netflix Inc., the world’s largest paid streaming service, doesn’t show commercials. AT&T agreed this week to merge WarnerMedia with Discovery Inc., creating a new publicly traded company.

AT&T has been counting on the cheaper ad-supported option to broaden the appeal of HBO Max. At $15 a month, it’s one of the pricier streaming services. Netflix’s most popular offering costs $14 in the U.S., and Walt Disney Co.’s flagship streaming option is just $8.

Enough Revenue

WarnerMedia’s chief executive officer, Jason Kilar, has said HBO Max can generate enough advertising revenue to make up for the lower monthly subscription price, making the company indifferent to which one consumers choose.

Where HBO Max goes from here, however, will probably be decided by a new management team.

The deal with Discovery is expected to close by the middle of next year. Discovery CEO David Zaslav, who will lead the combined operation, has yet to say how HBO Max and another streaming service, Discovery+, will be marketed. Kilar is reportedly negotiating his exit from the company.

HBO Max launched in May 2020, building on a brand used by WarnerMedia’s nearly five-decade-old premium cable network. Last quarter, AT&T added 2.7 million U.S. subscribers to HBO and HBO Max combined, for a total of 44.2 million. It aims to have 67 million to 70 million worldwide by the end of 2021, up from 64 million now.

For the moment, subscribers outside the U.S. all have traditional HBO. AT&T plans to begin HBO Max’s global expansion next month, starting with Latin America.

©2021 Bloomberg L.P.

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