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Give credit where it’s due, AT&T (NYSE: T) is raising awareness among consumers about its new HBO Max streaming service. Although the startup was relatively slow immediately after launch last May, the company reports that 17.1 million people had activated HBO Max by the end of last year.
And others have surely registered in the meantime. Hub Research indicates that of the 3,000 US consumers surveyed in February and March, 31% were HBO Max viewers. It’s still the lowest proportion of the country’s population among the major streaming names – Walt disneyof (NYSE: DIS) Hulu and Disney + were liked by 41% and 42% (respectively) of respondents, while 71% of respondents were Netflix (NASDAQ: NFLX) the subscribers. But HBO Max saw the biggest percentage gains in audience growth through February.
The problem is with all of the video-on-demand services in question – including Amazon (NASDAQ: AMZN) Prime – HBO Max is the one that US consumers like the least.
Image source: Getty Images.
Most likely to be canceled
The recent Hub report suggested that 17% of consumers surveyed said they would “permanently drop” the HBO Max service for the foreseeable future. On a related note, only 63% of that crowd said they would “continue” to pay for HBO Max. On both counts, it was the worst result among the six streaming names examined. It was even worse than Discovery + ‘s scores of Discovery communications (NASDAQ: DISCA) (NASDAQ: DISC) which doesn’t have the kind of splashy content offered through HBO Max.
At the top of the list you’ll find Disney +, followed closely by Netflix. Only 7% of current Disney + subscribers surveyed said they intended to cancel, while 77% of those customers said they were sticking with it. Netflix is holding up a bit better in terms of customer deactivation, as only 4% of its US subscribers say they will give up their service for good. However, only 73% of this cohort are sure to continue paying for Netflix in the future.
On the surface, the numbers aren’t drastically different from best to worst. The disparity between HBO Max and the loyalty leaders in the industry speaks volumes, especially given how AT&T has offered access to first-run movies like Wonder Woman 1984 and Godzilla vs. Kong. JD Power reports that the average American household now spends an average of $ 47 per month on four streaming services, leaving HBO Max struggling to get into the mix.
While the Hub report didn’t address it, it would be naive to ignore that HBO Max is the most expensive service of its kind, priced at $ 14.99 per month (it’s free for customers of other AT&T services – such as HBO cable subscribers – who qualify). Above-average cost can have a lot to do with relative disinterest.
Ads won’t help much
Uncompetitive pricing is not necessarily the end of the world. AT&T plans to launch an ad-supported version of HBO Max in June, which should allay consumer concerns about costs.
But even so, ad-supported streaming platforms haven’t exactly delivered exciting results. Comcastof (NASDAQ: CMCSA) Peacock debuted with ad-supported tiers in July, and although it had 33 million signups at the end of last year, the service has only raised around $ 118 million in revenue. advertising in 2020. Macquarie Research estimates that Peacock’s subscriber base will grow to 52 million by 2024, when it will generate annualized revenue in the order of $ 2 billion. Macquarie’s outlook still suggests that only a third of Peacock’s business comes from advertising, with the other two-thirds driven by subscription fees.
The point is, while the free and / or subsidized version of HBO Max follows Peacock’s lead, above-average pricing remains a challenge. Indeed, as streaming entertainment now turns into a commodity, a streaming price war seems inevitable.
At the end of the line
If you are a shareholder, don’t panic. The entire Warner brand represents less than 20% of AT & T’s revenue, and HBO itself makes just over 4% of the company’s sales. HBO Max was never really going to move the tax needle for the business.
Still, as the business needs HBO Max to be a stand-alone profit center and more than just a tool for customer retention and attraction, something isn’t clicking for consumers just yet.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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