As the streaming world continues to fight for viewers, ad-supported content is becoming an increasingly attractive option for consumers who are looking to manage their entertainment budget. HBO Max has now launched its long-promised ad-supported tier, shaving $5 off the monthly fee to bring it down to $10 while capping streaming resolution at 1080p and removing offline download capability. Moreover, the day-and-date releases of Warner Bros films like the upcoming Matrix sequel will only be available to ad-free subscribers.
Executives have promised that viewers would see a maximum of four minutes per hour of ads, which puts the new HBO Max tier in similar territory as ad-supported services from Discovery+ and Peacock. Ads are reportedly integrated in such a way to provide “an elegant, tasteful ad experience that is respectful of great storytelling.” A test of the ad-supported tier by CNET mentions that the ads did go by quickly, but the publication also cites the relatively high cost compared to ad-supported Hulu at $6 a month, and options without ads from Netflix and Disney+ at $9 and $8 monthly, respectively.
The ad-supported version of HBO Max could be an attractive way for new subscribers to test drive HBO content, and the company understands that it needs to pursue this strategy to spur adoption. HBO Max EVP & GM Andy Forssell commented, “Advertising is a time-tested way to reduce the cost of great entertainment and reach a wider audience.” Furthermore, offering both premium and ad-supported options is likely to enhance revenue generation and effectively mirrors the pay TV business.
“It’s a new direction for HBO,” said Brett Sappington, Interpret’s VP of Research. “Traditionally, HBO’s lack of advertising has insulated it from advertiser pressure. The company could be as creative and edgy as it wanted in its productions without fear of advertiser backlash. It will be interesting to see if this new business model affects that creative freedom.”
HBO and HBO Max had over 44 million subscribers as of March 31, ahead of the company’s projections. WarnerMedia recently increased its forecast for HBO to hit 120-150 million subscribers worldwide by 2025. The ad-supported tier is likely to play a role in that. According to Interpret’s VideoWatch™, 80% of current HBO Max subscribers (78% of regular HBO viewers) watch ad-supported subscription content, revealing a willingness among the HBO base to tolerate ads for cost savings.