AT&T's WarnerMedia takes calculated risk with SVOD price

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We learned three key details about the forthcoming WarnerMedia SVOD service last week,per The Wall Street Journal:

Donna Speciale.WarnerMedia

  • AT&T is reportedly pricing its forthcoming WarnerMedia SVOD service at $16-$17 a month. It’s set to launch in beta later this year, with the full version coming as soon as March 2020.
  • The service will reportedly launch as a single offering at that price point — pivoting from its expected three-tiered pricing strategy. The unified offering will combine TV and movies from across WarnerMedia, including HBO and Warner Bros., into a package for the SVOD, all to be included at the one set price.
  • The telecoms giant might also be considering an ad-supported version of its service to launch in late 2020.It would have a much lower appeal given that it’s highly unlikely it would include HBO, which is arguably the most exciting aspect of the SVOD. HBO has never been offered with ads.

Despite a lofty price point, AT&T is likely looking to drive uptake right out of the gate by virtue of HBO. This SVOD will position itself as a premium service, a tactic that could work given current HBO subscriber numbers: At $15 a month, HBO Now (the standalone service) has about8 million subscribers, which indicates that there is an audience willing to pay a high price for premium content.

For context, Netflix’s standard plan is $13, and Disney+ is set to launch for just $7 a month. Most HBO subs can likely be upsold on WarnerMedia SVOD, given its deeper content bench and minimal price increase. That should give the service a meaningful boost to start.

The service will also likely rack up usage in its early days through partnerships with pay-TV operators: Comcast and Charter Communications willoffer the service for free to customers that subscribe to HBO through them.

The decision to launch a single offering is the result of WarnerMedia trading off cost-consciousness for simplicity, a calculated risk that could help in the crowded market. AT&T decided against a more complex offering, opting to simplify — albeit at a higher price point — to provide a streamlined offering as it heads into a crowding space.

By the time the WarnerMedia offering comes out of beta, Disney+ and Apple TV+ will already have come to market, and Netflix, Hulu, and Amazon Prime will likely continue to flourish. The company’s initial three-tier strategy, which we outlined last Decemberhere, was intended to provide a range of price points for various content access. Instead, its new price point will make it the most expensive SVOD service on the market — the next-highest price point is Netflix’s premium plan at$16 a month.

But segmenting content across three separate tiers could have amounted to equal or greater risk if it confused or turned off already-overloaded consumers. Still, according to Magid Research, the average SVOD sub is willing to pay just$38 for up to six services. A $17 WarnerMedia SVOD puts a serious dent in that budget.

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