WarnerMedia’s upcoming SVOD service will actually be introduced as a single-tier platform and will be positioned, in terms of price and library breadth and depth, somewhere between Disney + and Netflix.
That’s the essential takeaway from MoffettNathanson, which said it recently met with John Stankey, CEO of AT&T-owned WarnerMedia. Stankey, the company said, “raised the curtain” on the company’s direct-to-consumer plans.
After the market was “bored” with Apple’s presentation of its upcoming SVOD service, MoffettNathanson said, and Disney “impressed” with its showing off of Disney +, it will soon be “WarnerMedia’s turn in the spotlight,” the research firm explained, setting the table.
“While details remain close to the vest, the initial SVOD service appears to be a single tier product that will not be named HBO (but will likely include the HBO brand) and could be bundled to HBO customers via traditional MVPD relationships,” MoffettNathanson said. “The product is designed to fit between the ‘all you can eat’ focus of Netflix and the thinner, more quality-oriented offering from Disney. In short, think Disney with a deeper library of A-titles or Netflix with fewer B and C products.”
Following Disney’s acquisition of the Fox entertainment assets, WarnerMedia no longer has the biggest content library. Still, MoffettNathanson noted, it boasts 21% of the 200 most popular films and 18% of the highest rated TV series.
“The service plans to use the existing HBO OTT offering including its library combined with selective Warner Bros. TV and film library content that targets specific demographics,” the research firm said. “Mr. Stankey believes the HBO library and the Warner Bros. theatrical library are really important components to differentiate the service as all of the new SVOD services are trying to replicate this content without a similar library asset in their back pocket.”
MoffettNathanson also expects an AVOD component to eventually sprout out of the WarnerMedia DTC product, similar to how Hulu markets a baseline $5.99 service that includes commercials.
“It is clear that the WarnerMedia SVOD service could flex [its] muscles on a global scale, if they want to,” the firm noted.
Like Disney, WarnerMedia will have to impact the bottom line by foregoing high margin licensing revenue from outside platforms.
“And to the extent that any new DTC SVOD service will only accelerate the decline of traditional distribution, AT&T will suffer faster defections not only from DirecTV but also from the Turner Networks.”