WarnerMedia’s price options for new HBO-heavy SVOD look like revenue eaters

Friends
The New York Times said that "Friends" will likely end up being exclusive to the WarnerMedia streaming service. (WarnerMedia/NBC)

WarnerMedia will be launching a new streaming service in 2020, but the company still hasn’t figured out how to price it, as its current options aren’t all that appealing.

The New York Times dug into the complexities WarnerMedia is facing as it determines how much to charge consumers for the upcoming service. The service will be filled out with film and television titles from Warner Bros., but will likely focus on offering HBO library content. HBO shows and movies have proven popular, enough so that HBO’s own streaming service, HBO Now, has attracted 7 million subscribers, according to the report. That doesn’t include the millions more subscribers who pay for HBO through pay TV providers.

Since current HBO subscribers already pay $15 per month for the service, WarnerMedia is reportedly considering throwing in access to the new WarnerMedia SVOD for free or as a tuck-in for new HBO subscriptions. That move would limit the amount of revenue WarnerMedia takes in from the new service.

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The report mentions that AT&T-owned WarnerMedia could also lower the price of HBO, both as a standalone streaming service and as a premium channel add-on for pay TV providers. But again, that would impair HBO’s revenue generating abilities.

RELATED: WarnerMedia’s streaming service won’t be a three-tiered product, analyst says

Either way, there’s a good chance that the WarnerMedia SVOD will be priced much higher than many of its closest streaming video competitors. MoffettNathanson analyst Craig Moffett last week wrote in a research note that the WarnerMedia SVOD will likely be priced “significantly higher” than Disney+, which will cost $7 per month when it launches on Nov. 12.

Netflix’s most popular plan is priced at $13 per month, Hulu’s ad-free version costs $11 per month and Amazon Prime Video costs $9 per month.

While pricing remains a hurdle for WarnerMedia, MoffettNathanson suggested that the company has already sorted out some other aspects of the service.

Moffett recently interviewed WarnerMedia CEO John Stankey, who said the initial direct-to-consumer product will be a single offering to make it straight forward and easy to understand for consumers. Moffett said that this brings WarnerMedia’s streaming strategy closer in line with what Netflix does, and what Disney plans to do with Disney+ later this year.

“We see this as an obvious improvement over multiple offering and more akin to other traditional approaches,” Moffett wrote.

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