When AT&T acquired Time Warner in early 2019, the newly formed media behemoth was faced with a daunting task: Turn $200 billion of debt into a new streaming service that can compete with the Netflixes and Disneys of the world.
John Stankey, CEO of the new WarnerMedia, set a lofty goal: Get to 70 million subscribers. (For comparison, Netflix currently has around 150 million subscribers and Disney estimates that it will have 60 to 90 million by 2024.)
“Somebody in the legacy media space will build a platform of scale and get to 70 million to 80 million subscribers,” Stankey told CNBC. “We’d like it to be us.”
To reach that number, Stankey said he plans on breaking down the many silos that exist in WarnerMedia. Time Warner has traditionally kept Warner Bros., Turner and HBO independent of one another, and they now join an AT&T that has streaming services of its own, chiefly DIRECTV NOW and WatchTV.
What is HBO Max?
Content from Warner Bros., Turner and HBO will be combined into one service, called HBO Max, set to debut in spring of 2020. In addition to including all of HBO’s library, the service made a splash earlier this week by announcing that it had acquired the rights to Friends.
This was a direct hit to its biggest competitor, Netflix. According to a joint analysis from Nielsen and the Wall Street Journal, Friends was Netflix’s second most-watched show last year after The Office, accounting for 31.8 billion minutes on the service.
The company hasn’t revealed pricing details yet, but it’s safe to assume that it will be north of HBO Now’s $15/mo., which WarnerMedia will still offer.
What does this mean for DIRECTV NOW?
While HBO Max will be made up entirely of on-demand content when it initially launches, it will eventually merge with AT&T’s live streaming service DIRECTV NOW, according to CNBC.
This service will have on-demand content from Warner Bros., Turner and HBO mixed in with the live TV channels of DIRECTV NOW, all within one ecosystem. This would theoretically alleviate one of the biggest headaches for users — the endless toggling between a handful of services to find what you want to watch. But will it be enough to staunch the bleeding for the struggling streaming service?
DIRECTV NOW shows little evidence that it’s capable of creating a seamless user experience. It’s been known for its glitchy and cumbersome interface for years, something HBO Now has struggled with as well.
Consumers have noticed. According to the most recent report from the American Customer Satisfaction Index (ACSI), HBO Now and DIRECTV NOW were two of the lowest rated streaming services in the industry. In fact, the only service to receive a lower rating than DIRECTV NOW was the free streaming service Sony Crackle.
DIRECTV NOW has consistently raised prices and lost channels
DIRECTV NOW is hemorrhaging customers. It’s lost 83,000 since January, and as many as 350,000 since October 2018 when it hit its peak.
That’s likely a response to DIRECTV NOW’s routine price hikes. March 2019 saw one that was particularly unpalatable to subscribers. The service raised prices on its base plan from $40/mo. to $50/mo., while also losing 17 channels (including A+E Networks, AMC Networks and Discovery). There’s a chance that bundling HBO Max with DIRECTV NOW would allow WarnerMedia to offer a better product at a more reasonable price, but history suggests otherwise.
That said, the plan is the first of its kind, and it certainly has its appeal. No other live TV streaming service has announced plans to merge with on-demand services like this. As more and more media companies create their own streaming services, WarnerMedia has the ammo to create the kind of all-in-one product that few companies could compete with.