Max, the streaming service formerly known as HBO Max, has seen a significant drop of 700,000 subscribers in the past three months. Despite this decline, streaming revenues at Max, which is owned by Warner Bros. Discovery, have increased by 5 percent, with a 30 percent rise in advertising revenue year-on-year. These numbers highlight a major question for the streaming industry: While people enjoy using Max, they are reluctant to pay for it.
Determining the appropriate pricing for services and deciding whether to offer ad-supported tiers are the central challenges of the ongoing streaming wars. Almost every service, including Netflix, Disney+, Apple TV+, has recently increased their prices or added commercials to their offerings. In light of these changes, Max’s service may seem less appealing despite having the highest price.
Max increased its prices from $15 to $16 for its ad-free version and then unveiled its Ultimate Ad-Free tier for $20, which includes 4K streaming. This price is comparable to Netflix’s Premium tier, which is also priced at $20 per month. However, Max recently informed its legacy HBO Max customers that their $16-per-month plan with 4K streaming will be ending in December. This move has led to a reassessment of the value proposition of Max, especially when considering that its ad-supported plan is only $10.
Sarah Henschel, a principal analyst at Omdia who closely tracks the streaming market, noted that Max’s subscriber base has been relatively flat for nearly a year and has experienced subscriber losses in the previous quarter. While subscriber growth is typically expected at the end of the year due to holiday-season sign-ups, it is ultimately the revenues that are of greater importance to investors who are currently focused on profitability.
In addition to Max, other companies like Disney+ initially pursued low price points to attract subscribers, resulting in increased user numbers but financial losses. As the streaming market becomes more competitive, these companies have turned to ad-supported tiers and higher prices to offset their losses. They have also implemented measures to crack down on password-sharing, a strategy that has been effective for Netflix so far.
Content availability is another critical factor for streaming services. Max has a vast library of content, but it has shelved some shows like Westworld to save money. In an industry where movies and TV series constantly transition between streaming platforms, the impact of this reshuffling seems to be more noticeable now. The recent Hollywood actors’ strike and a preceding writers’ strike have also slowed down the production of new films and shows, potentially resulting in a reduced flow of fresh content. This shortage of compelling new shows and movies may impede substantial growth in Max’s user base for some time.
During an earnings call, Warner Bros. Discovery CEO David Zaslav acknowledged the challenges posed by the industry’s recent strikes, expressing hope for a swift resolution. He emphasized the need for adaptability and a strong array of assets to navigate the rapidly changing marketplace. Ultimately, consumer behavior plays a pivotal role in determining the willingness to pay for a streaming service.
In conclusion, Max’s experience sheds light on the complex dynamics of the streaming industry. It highlights the challenges of pricing, content availability, and consumer behavior, all of which have significant ramifications for the success and profitability of streaming services.