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The Reasons to Believe in HBO Max -- and the Reasons Not to

By Stephen Lovely - Mar 1, 2020 at 4:40PM

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HBO Max has a lot going for it, but it's entering an unforgiving market.

It's easy to see why AT&T (T -0.14%) wants to expand its streaming video business. Cable subscriptions are down -- streaming subscriptions are up. Content is king, but the most profitable streaming services are those that create their own. And AT&T is sitting on one of the most respected creators of premium content around: HBO. All things considered, AT&T's choice to step up its streaming offerings makes perfect sense. Hence the imminent arrival of HBO Max, the new subscription video on demand (SVOD) effort from AT&T.

But obvious opportunities have a habit of attracting competitors. Other companies, including tech companies and entertainment giants, are converging on the SVOD space. AT&T's variously IP-loaded, tech-savvy, and deep-pocketed competitors include established streaming brands like Netflix, relative newcomers like Walt Disney, and upcoming options like Comcast subsidiary NBCUniversal's Peacock. Does HBO Max have what it takes to succeed? Here are two reasons why it might -- and three reasons why it might not.

A television viewer points a remote at a TV screen

Image source: Getty Images

The bad: The price

Back in the summer of 2019, some surprising news leaked. According to then-contemporary reports, the as-yet-unnamed AT&T subscription video on demand (SVOD) service would cost $16 or $17 per month. This seemed especially surprising given the revelation at the time that Disney+ would cost a mere $6.99 per month. The leaked price would have made AT&T's new offering more expensive than Netflix and more than twice as pricey as Disney+ or Hulu.

The reported numbers ended up being a bit off: AT&T later announced that HBO Max would charge $14.99 per month. Even the new price, though, seems rather high in comparison to the competition. And that's not exactly ideal, given that the market is fracturing, and experts predict lots of subscription-stacking and subscription churn -- things that will make low prices ideal and turn once-typical prices in the $15-per-month range into liabilities. If customers in this new streaming world prefer to juggle a few cheap services, HBO Max will suffer.

The good: HBO

HBO Max is a new service, but it's building on an established brand. HBO has long been one of the most respected brands in media. It was HBO that ushered in the "golden age of television." In fact, HBO was creating original series before Netflix even existed.

Original content is essential to streaming services now, and HBO remains the gold standard. It even has its own SVOD offering, HBO Now, which allows customers to sign up for HBO on streaming and mobile devices rather than via cable and satellite services.

All of this is to say that the HBO brand, acclaimed content, and network of creative talent are major assets to the new HBO Max.

The bad: Also HBO

HBO is a great reason to get HBO Max. But is HBO Max a great reason to cancel HBO?

After all, HBO Max won't just be built on HBO's big hits -- it will actually offer everything that's on HBO, including brand-new content as well as the premium channel's entire back-catalog. By contrast, not all of HBO Max's new content will be on HBO. The moment that HBO Max comes out, the old HBO will become an inferior service. That's presumably by design, but understanding this should temper any expectations of HBO Max and HBO living on in harmony, attracting dual user bases for AT&T. If all goes well, HBO Max will devour HBO's streaming presence.

Brand confusion could be an issue, too. AT&T seems to have an ongoing issue with brand overlap and self-cannibalizing services -- the company currently offers three separate multichannel live TV subscription services, and it has named them AT&T TV, AT&T TV Now, and AT&T WatchTV. A similar issue exists with HBO's brand, which covers HBO (the premium channel and overarching brand), HBO Now (a direct-to-consumer HBO streaming subscription), and HBO Go (a streaming app for customers who get HBO through a pay-TV subscription). On top of that, AT&T will soon add HBO Max. That's a lot of HBO's for customers to keep straight.

The good: Content is king

HBO's content muscle will be a big help to HBO Max, but AT&T isn't counting on HBO hits alone to carry the service. The company is after licensed content, too. AT&T's biggest get is Friends, the 1990s sitcom that is among the streaming world's most coveted prizes.

In an era when licensed content is becoming scarcer, HBO Max will have it. In a tribal streaming market, that could make a difference. We already know Netflix's licensed content is a big deal to the service, especially in terms of total streaming hours (one possible explanation -- old sitcoms are easier to binge over and over again than modern serials and prestige television). Having something besides HBO originals is important, and having something as popular as Friends could be huge.

That isn't to say that AT&T isn't focused on new stuff. In fact, Friends itself will provide new content: A new Friends cast reunion special will be an HBO Max exclusive. That's in addition to other new programs, including HBO's latest shows and new HBO Max exclusive original content.

AT&T is spending big: HBO's content budget is soaring more than 50% -- to about $1.5 billion -- to cover all of the HBO brand's content needs. It's a big investment, and it may be the best reason to believe in HBO Max.

The bad: AT&T has a mixed record in streaming

I mentioned earlier that AT&T has three multichannel live TV streaming services, each of which has "AT&T" and "TV" in their names. But I didn't mention that AT&T TV Now was once called DirecTV Now, that its subscribership collapsed in dramatic fashion in 2018, and that AT&T is now being sued for (allegedly) creating phony accounts and saddling real-life customers with them. Not great!

On the other hand, HBO Now has been a success. That direct-to-consumer streaming option debuted in 2015 and helped fuel overall growth in HBO's subscriber base -- particularly in 2017, when the app helped fuel HBO's best year ever for subscriber growth.

AT&T has other streaming holdings, too. The company owns Crunchyroll, AT&T WatchTV, and the cable-like AT&T TV, among others.

AT&T's wide range of offerings have have met with a wide range of fates. The variety of success (and lack thereof) forms a distinctly mixed record in streaming. The mixed signals are reflective of the difficulties facing HBO Max prognosticators: If you believe HBO Max will be a hit, you'll find plenty of past evidence supporting that. If you think it'll flop, you'll have plenty of examples to run with, too.

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