HBO Max finally revealed (AT&T video subscribers with HBO subscription gets it for free)

Will there be an added sat channel?
Directv subs will just get cinemax mixed into the HBO package with liner channels showing some of the VOD stuff?

And a price cut of HBO to $14.99? Just be part of choice or higher?

Now Free HBO can make up for the cubs channel and likely an $10/mo rsn fee.

 

Nice to see folks that sub to HBO Now will be transitioned to HBO Max.

Rich

 

Yes, although for now, they're saying that the only HBO Now customers who actually gain access at no additional cost to the HBO Max app will be those who subscribe to HBO Now directly through them, i.e. those who signed up at HBONow.com and let HBO/AT&T bill their cards directly. But I'm sure that most HBO Now subs signed up inside the app, which means that they get billed by the controlling app store from which they downloaded the app: Apple, Google, Amazon or Roku. (Also, at least some third-party digital HBO distributors, such as Prime Video Channels and Hulu, allow their subscribers to log into the HBO Now app with their Prime Video or Hulu credentials. Likewise, those customers do not automatically gain access to HBO Max.) Note that in those cases, the biller/distributor gets a cut of the monthly fee. (Apple and Google publicly state that they take a 30% cut of subscription revenue in the first year, dropping to 20% thereafter, although it's certainly possible that major services can and do negotiate lower cuts for the app stores than that.)

The big picture is this: if you currently get HBO in any format, and the company that you directly pay your subscription fee to is HBO/AT&T, then you'll immediately and automatically become an HBO Max subscriber when it debuts next spring (while still retaining, for awhile anyway, the ability to use your current HBO Go or HBO Now app too, if you still want to use it for whatever reason). This category amounts to about 10 million out of HBO's current 34 million US subs.

For the other ~70% of HBO subscribers, who pay some other company for their subscription (e.g. Comcast, Charter, Verizon, Amazon, Apple, etc.), whether or not you'll be transitioned over to HBO Max, and if so, whether it will be at the same price you currently pay, is all up in the air, to be determined by the various negotiations currently ongoing between AT&T and those various distributors. AT&T's goal is to transition *all* HBO subscribers over to HBO Max. And while they're being (IMO) aggressive on the retail direct-to-consumer price of HBO Max, holding it at the same $15 typically charged for HBO, I would bet that AT&T is trying to raise the wholesale price that they receive from their distribution partners for HBO Max vs. HBO.

The only credible figure I've seen for the average wholesale price for HBO came from an industry analyst who said that it's about $7.65 per sub per month. My guess is that AT&T wants to increase that to the $10-11 range for HBO Max (which, if I had to guess, is probably about the same as the average wholesale price that AT&T gets for an HBO+Cinemax combo subscription* from cable operators). But if Comcast charged, say, a $16 retail price for HBO Max and could keep $5 of that, that would still be a 31.25% cut for them, which I would definitely bet is better than whatever commission Netflix gives anyone. (And Netflix doesn't even allow in-app sign-ups any more, so they don't pay any commissions to digital distributors like Apple and Roku any more for new customers, only for existing customers who signed up that way in the past.)

*Potentially related development: this year, both Comcast and Charter have removed Cinemax from their large channel bundles that include lots of basic channels plus HBO and Showtime, while holding the price of those bundles the same. My theory is that those two MVPDs -- who, along with AT&T, account for the vast majority of HBO subscribers (remember, DISH no longer carries it) -- are getting ready to switch out HBO+Cinemax in their bundles for HBO Max, while holding the price of those bundles steady. Meanwhile, on their a la carte menu of premium services, they'll switch out regular HBO for HBO Max and either charge the same price or maybe a buck more. (MVPDs can easily get away charging $16 for HBO Max a la carte while it's priced at $15 as a standalone streamer. Folks will gladly pay an extra dollar to have the service integrated into their cable box and on the same cable bill.)

 

I wonder if AT&T would someday want to get rid of all of their live TV services and just go with HBO/Max? That way they would have to go through the hassle of channel contract negotiations. They could get rid of the channels they own except maybe for CNN and just keep using their content on HBO/Max.

 

With the name HBO Max, I can see why you think that it includes Cinemax, given that they've always nicknamed/abbreviated that service as "Max". (Cinemax's streaming app is even named Max Go.) And an otherwise pretty accurate article this past summer from the WSJ said that HBO Max will, in fact, include Cinemax content. That said, AT&T hasn't said a peep about HBO Max including anything from Cinemax. Maybe the article was wrong on that point. Or maybe AT&T wants to keep that point under wraps for whatever reason.

I've been saying, and still believe, that Cinemax will cease to exist as a service/brand in 2020 when HBO Max launches (or at some point in the following months). I don't see how it really fits into AT&T's overall long-term pay TV strategy, which is really only about 3 services going forward: HBO Max, AT&T TV and DirecTV (with the emphasis on the first two, with DirecTV gradually fading from the scene over several years).

Cinemax just doesn't serve much purpose any more. It was originally launched to be a movies-only sibling service to HBO in the early 80s. But it really has only ever shared the same film library with HBO. They juggle movies back and forth between them to give the illusion of variety but it's all the same stuff. Then Cinemax become known as a soft-core porn destination (an association that permanently tarnished its brand, IMO -- if you're looking for that stuff now, it's all over the internet, who needs a premium cable channel for it?). Finally, in the past decade, they invested modestly in a string of Cinemax Original series with a particular focus on men -- action and thriller shows like Strike Back, Banshee, and Warrior with a broader, pulpier tone than the higher-brow award-winning HBO Originals.

But in their big HBO Max unveiling, the company said that HBO itself skews male and middle-age/older. So the other stuff that they're adding to HBO under the new HBO Max service will skew female and younger to help broaden out the overall service's reach. So what value does Cinemax add to the company's overall portfolio of services? It has to skew even more male than HBO. It's never been offered as a direct-to-consumer streaming service like HBO Now and as a brand is largely absent from the cultural conversation except as a dirty joke via the "Skinemax" moniker. So my guess is that Cinemax holds little appeal for Millennials and younger consumers.

This is why I think AT&T will just say to their cable partners like Comcast and Charter, "Hey, we're going to shut down Cinemax. In all those bundles you sell that include HBO and Cinemax, just swap them out for HBO Max and pay us the same wholesale rate." The library of Cinemax Originals will become available in the HBO Max on-demand library while the Cinemax brand and channels just quietly die. There aren't many current Cinemax Originals in production now, except for two new series that premiered this year, Warrior and Jett (the latter with a female lead, an oddity for Cinemax). If either gets renewed for additional seasons, I imagine they'll just be rebranded as "Max Originals," the name for the new line of originals exclusive to HBO Max.

 

They are making over $4 billion a year from Directv, so maybe someday when that profit goes away but it will be a LONG time before they get there.

 

Sorry I should have said eventually getting rid of AT&T TV for just HBO/Max when AT&T would replace, DTV, UVerseTV and AT&T TV Now.

 

That’s an interesting way of looking at it. What would they do if AT&T TV failed?

 

Wrong. I would bet that a HUGE amount of the premium service content consumed by Comcast and Charter customers comes through their on-demand platforms and the providers' own apps which they authenticate (e.g. HBO Go, Showtime Anytime, etc.). And those MVPDs understand as much as anyone that the whole game is shifting to on-demand streaming, which is why they're signing up as distributors for those services. (Let's see how many MVPDs jump on board to distribute Disney+.)

How much does AT&T spend on Cinemax original programming? Not that much. How much are they going to spend on Max Originals that will be exclusive to HBO Max? Not to mention all of the licensed content like BBC series, South Park, CW series, etc.

HBO Max will have over twice as much content as regular HBO. Cinemax has only a fraction of the number of hours of content that HBO does. Trading Cinemax for HBO Max is a win for viewers, especially if HBO Max ends up offering the entire library of past Cinemax Originals.

 

AT&T TV hasn't even launched nationwide yet. I think you're talking about AT&T TV Now, although I don't think we've seen the ultimate iteration of that service either. At any rate, once AT&T TV launches nationwide (was supposed to happen this quarter, now sounds like it will be Q1 2020), it will be the exclusive MVPD option sold to AT&T broadband customers, with sales of Uverse TV immediately dropped. (They've already stopped selling Uverse TV in the AT&T TV pilot markets like St. Louis.)

 

What is the definition of "failed" for AT&T TV? The only definition that matters is AT&T's. If they sell it at a price that is profitable to them, and it gives them a more modern platform to sell to Uverse customers so they can phase out Uverse TV, they might consider it a "success" if it only has a few million subscribers. At least in the first few years.

When they bought Directv their overall goal would be for the combination of Uverse TV and Directv to be more profitable to them than Uverse TV alone was and would be in the future. Given the content cost differential between Uverse TV and Directv they were probably barely breaking even on Uverse TV before and likely had projected losses on it down the road. All the smaller cable companies are now saying they feel lucky to break even on TV and only keep selling selling TV + internet as a package helps sell both but if they have a customer drop TV they don't care if they can keep them as an internet customer.

Directv has so far made them $22 billion and is generating over $4 billion a year in free cash flow, and the reduced content cost has made Uverse TV more profitable as well. This all needs to eventually pay the cost of the acquisition, which is somewhere between $50 and $68 billion depending on how you account for it - so they are about 1/3 to 1/2 of the way there. They need AT&T TV to contribute something to that profit eventually, so while in the short term "act as a good landing spot for Uverse TV customers" is probably good enough, in the long term it needs to help drive customers towards AT&T for internet service is much more profitable than TV. The reach of Uverse will always remain limited, this means driving customers towards fixed wireless 5G in a few years when AT&T is able to sell it in much of the country.

That's the goal - if it can stack up well against Comcast/Spectrum bundles then it will do well. Even with MVPDs declining due to cord cutting it will do well. MVPDs are losing about 1% of their customers a quarter, so it will be a long slow fall - it will still be a viable business to be in through most of the next decade and perhaps well beyond that.

HBO Max is a separate thing that's not targeted at the MVPD customers, but targeted at those who have left MVPDs behind. Selling both AT&T TV and HBO Max gives them a way to go after all video customers, both those who still want traditional package based TV, and those who have cut the cord and just want to stream on demand and aren't interested in live TV like sports.

 

My TV provider charges $21 just for HBO so it’s a no brainer for me, I will cancel HBO channels save $6/mo and subscribe to HBO Max.


Sent from my iPhone using Tapatalk

 

What I meant when I said that AT&T TV will be the "exclusive MVPD option sold to AT&T broadband customers" is that it will be the only cable TV service that *AT&T* actively sells to their own broadband customers. I thought that was clear but I guess not. Sure, AT&T broadband customers will have the option to buy an MVPD service from another company, including vMVPDs that stream over their AT&T broadband connection, such as YouTube TV. Point is, once AT&T TV launches, AT&T will no longer sell Uverse TV at all. And while they will still sell DirecTV, they won't actively try to bundle it with AT&T broadband, the way they do now. (I see TV ads and direct mail ads all the time for "AT&T Fiber + DirecTV".) I question whether they'll even continue to offer any kind of bundling perks for broadband + DirecTV; currently they give a $10/mo bundling discount and, I believe, remove the data cap on broadband plans below 1 Gbps (which typically have a 1 TB cap).

DirecTV Now/AT&T TV Now has been targeted at budget-sensitive cord-cutters, not at mainstream cable TV subscribers. It's never been bundled with AT&T home broadband. (Don't underestimate the power of AT&T's marketing to push various consumer segments toward or away from various products.) But it's not just a matter of marketing, it's also been about deficiencies in the "Now" product itself. It's never been offered with its own custom-built set-top box/streaming device. It's never offered a capacious, full-featured cloud DVR. It's never carried quite the full suite of channels offered on the traditional DTV and Uverse TV platforms. And, from a technical/performance perspective, it's just never been ready for primetime as an equally reliable substitute for traditional cable TV.

I believe AT&T TV will resolve all those shortcoming, except perhaps the technical bugs that have deviled DirecTV Now to varying degrees for years now. We'll have to wait and see on that point. Bottom line is that, once AT&T rolls it out and begins advertising and bundling it, AT&T TV's nationwide subscriber count will quickly surpass where AT&T TV Now currently stands.

I suspect that when the dust settles next year, there won't be much to differentiate AT&T TV and AT&T TV Now except that the former will require an up-front contract while the latter will not, and the former will offer a free streaming box and a $10/mo bundling discount for AT&T broadband customers while the latter won't offer either.

Yes.

That's what so cunning about AT&T's decision to price HBO Max, which has over twice the content of HBO (including ALL of HBO), at just $15, the same price as HBO, if you buy it directly from them as a standalone streaming service. It totally boxes in their MVPD distributors like Comcast and Charter. Those distributors basically have 3 choices:

1. Renegotiate their current distribution deal with AT&T to sell HBO Max instead of regular HBO. But if they do this, AT&T is going to drive a harder bargain and insist on giving the distributor a smaller cut. HBO typically sells a la carte from MVPD distributors (and as a streaming standalone) at $15/mo. But it's also included in some MVPD bundles (e.g. Charter's Silver and Gold packages, Comcast's Digital Premier), and some MVPDs give it away for limited periods as a promo, etc. Let's say that the average price that MVPD subscribers pay for HBO is $13/mo. The only figure I've seen from an industry analyst says that the average wholesale price that MVPDs pay for HBO is only about $7.65/mo per sub. That would leave them with about $5.35/mo, a 41% cut of $13! That's a lot. My guess is that AT&T will try to get a wholesale price for HBO Max closer to $11/mo, which is probably around what they get for a combo of HBO+Cinemax from those MVPDs who sell that pair as a bundle or part of a package. MVPDs could easily get away with charging $16 for HBO Max a la carte but they probably can't go any higher than that with AT&T selling HBO Max at $15 standalone. Priced at $16 a la carte (with no more discounts or freebies for customers), and with AT&T taking a wholesale price of $11, would give MVPDs a $5 cut, or 31.25%. That's not as good as what they've historically gotten with HBO but, hey, the rise of the internet has made MVPDs less valuable to pay TV distributors (see: Netflix), so it's only fair that their margins get squeezed.
2. Refuse to renegotiate their current distribution contract for HBO, meaning that they won't offer HBO Max at all, only regular HBO. They'll continue to pay the same wholesale price for it, which we're presuming to be $7.65/mo. Likewise, they'll continue to sell HBO a la carte at their current $15 price and keep regular HBO in all the same bundles where it currently exists. The risk here, of course, is that the MVPD's customers will cancel their HBO subscription through them and go direct to AT&T to get HBO Max as a standalone streaming service for the same $15 price point. If it has over twice the content, including those exclusive new Max Originals, and a spiffy new app, why not make the switch? Only downside would be losing access to HBO on your cable box. Instead, you'd have to switch inputs to an Apple TV, Roku, etc. to launch the HBO Max app.
3. Refuse to renegotiate their current distribution contract for HBO, meaning that they won't offer HBO Max at all, only regular HBO. But instead of continuing to sell HBO a la carte at $15/mo, reduce the price, perhaps to $12/mo (the same price Comcast charges for Showtime). But assuming a wholesale price of $7.65/mo, that reduces the MVPD's cut to just $4.35 (i.e. 36.25%), which is less money than they might stand to pull in on each subscription to HBO Max if they sold it instead of HBO.

Oh sure, it's definitely better for AT&T. Ideally, they would cut out all their middle-men HBO distributors, both MVPDs and digital/app stores (e.g. Apple, Google, Amazon, Roku). When customers subscribe directly from AT&T, they don't have to pay a cut of the price to anyone else. But AT&T knows that lots of customers are ruled by inertia and want to keep getting HBO the way they have it now. And there is definitely a convenience factor in getting all your video through the same cable box/UI and on the same bill. So AT&T wants to keep those critical MPVD relationships intact, at least the big ones like Comcast and Charter. As for digital distributors, it'll be interesting to see what happens there. It wouldn't surprise me if they don't allow sign-ups at all inside the HBO Max app -- which would result in a cut of the ongoing price going to the app store owner/biller. Instead, they may do what Netflix now does: require new sign-ups via their own website, where they do the billing themselves.

Yes.

Uverse TV will continue to operate for a long while but they've already stopped selling it in those pilot markets where AT&T TV is being sold. When AT&T TV launches nationwide, it will be impossible to initiate Uverse TV service anywhere. But, as I say, existing Uverse TV subs will be given a long while to voluntarily transition over to AT&T TV.

 

Dropping Cinemax from their bundled packages is about increasing MVPDs' ARPUs but I disagree that it has nothing to do with HBO Max. It's a pretty strange coincidence that the two largest cable operators in the US both decided around the same time to drop Cinemax from all their bundles. Those guys aren't stupid and I'm sure that they were privvy to at least as much inside info about HBO Max as the Wall Street Journal, which reported back in the summer that HBO Max would include the content of both HBO and Cinemax. (And frankly, AT&T is almost advertising that idea by naming the service HBO Max, given that "Max" has always been the shortened name for Cinemax.)

A similar thing might be at play in Comcast's decision to push TCM out to an add-on tier, given that HBO Max's film library will include a lot of the same classic movies that air on TCM: HBO Max Will Host a Collection of Classic Movies Curated by TCM

Cinemax's subscriber numbers must be WAY down at this point. Completely dropped by DISH a year ago, and dropped from all bundles from Comcast and Charter. Cinemax offers far less original content than Showtime or Starz, despite generally being sold a la carte at about the same price, and it offers the same movie library as HBO, so doesn't add much when combined with it.

I still think AT&T's plan is to kill Cinemax next year, putting all their focus on HBO Max. Killing Cinemax would also add pressure on MVPDs to agree to switch over from selling HBO to the new HBO Max.