Deeper Dive— What's behind the HBO Max-Amazon impasse?

Amazon Channels
HBO has long been a part of Prime Video Channels, and its involvement may have helped spur its streaming growth. (Amazon)

HBO Max is scheduled to arrive in less than two weeks, and it still has some major distribution pieces to put in place. The Amazon Fire TV app store might not be one of them.

According to Light Reading, incoming AT&T CEO John Stankey told the audience at an investor conference that HBO Max will be available from virtually all app stores but maybe not Amazon Fire TV. HBO Max has already set several key distribution deals with Charter, YouTube TV, Hulu, Apple and Google. The service has yet to set deals with Roku or Comcast.

Launching without support on Amazon Fire TV would leave a major hole in HBO Max’s potential reach. Amazon Fire TV said at CES in January that it had 40 million active users, and that figure has almost certainly grown since then.

The companies could still reach a deal before HBO Max launches on May 27. When Disney+ announced its device support last August, Amazon was not on the list. It wasn’t until November 7, just five days before Disney+ launched in the U.S., that Disney and Amazon came to terms.

The question remains as to the cause of the apparent impasse between two companies that, as LightShed analyst Rich Greenfield pointed out, have played nice in the past.

Last year, the Wall Street Journal reported that the standoff between Disney and Amazon was over advertising. Amazon reportedly wanted to sell a “substantial percentage” of the available ad space on Disney streaming apps, and Disney wasn’t taking the deal. A similar scenario could be playing out between Amazon and WarnerMedia, which has Amazon Fire TV apps for channels including TNT and TBS.

Matthew Ball, a venture capitalist and former head of strategy for Amazon Studios, responded to Greenfield’s tweet and suggested Stankey’s statement could mean HBO Max won’t be included in Prime Video Channels, Amazon’s unified platform for subscription services.

HBO has long been a part of Prime Video Channels, and its involvement may have helped spur its streaming growth. In 2018, TDG estimated that nearly 53% of HBO’s direct-to-consumer subscribers came from Prime Video Channels. But the revenue sharing model might no longer work for WarnerMedia, especially since it’s investing $4 billion in HBO Max over the next three years. That accounts for programming costs and the loss of licensing revenue from titles that could otherwise be sold to third-party streaming services.

Greenfield further broke down HBO’s potential reasons for splitting with Channels stores. He said HBO Max going truly direct-to-consumer could mean higher subscriber acquisition cost, higher churn and a fractured user experience where some HBO Max content won’t be available on legacy HBO and HBO Now apps. However, it also means HBO gets complete control of the user experience, complete capture of data/analytics and the ability to claim a higher share of subscription revenues.

“…It appears that forcing everyone to use HBO Max which has everything is likely the best way for AT&T/WarnerMedia to fix past missteps where HBO was forced to put near-term profits over long-term strategy,” wrote Greenfield in a research note. “Sub-optimal short-term, but once people start using HBO Max, we suspect HBO Max believes they will use that as their starting point for all things HBO/HBO Max going forward.”