According to a report from CNN, WarnerMedia plans to launch its own streaming service in the fourth quarter of 2019, adding to growing list of OTT (over-the-top) services that bypass cable providers and bring television series and movies directly to viewers—most of them for a monthly fee.
The organization (formerly Time Warner) has several TV-content networks under its umbrella, including HBO, Turner, and Warner Bros. Turner’s assets include CNN, TNT, TBS, Cartoon Network, Turner Classic Movies, and others. Warner Bros. produces series such as The Big Bang Theory, The Voice, and The Bachelor for distribution on other networks, as well as feature films like Crazy Rich Asians, Wonder Woman, Blade Runner 2049, Ready Player One, and Dunkirk. Warner Bros. also owns DC Comics.
And of course HBO produces original series like Game of Thrones, Sex and the City, Westworld, and Silicon Valley, and others, plus documentaries and other films and specials.
WarnerMedia was acquired by communications and media behemoth AT&T in June. As viewers change habits and shift to skipping cable providers, networks like HBO and Turner that have traditionally depended on fees cable television providers pay for their content have begun shifting their focus to “direct-to-consumer” distribution via streaming video in an effort to survive the transition.
And if you’re thinking, “Wait, HBO already has a streaming service—actually, two,” you’re right. HBO Now serves viewers who don’t want to get the channel through a traditional cable TV package, and HBO Go streams episodes and films to viewers who subscribe to the cable channel.
According to a report in July shortly after the AT&T acquisition, it didn’t take long for the company to start talking about plans to shake things up at the boutique channel. AT&T executives said then that they want to move HBO towards creating more content with distribution to mobile devices in mind, even if that means shaking up the formula (for example, producing 20 minute episodes instead of 60 minutes) or a drop in quality.
AT&T executive and WarnerMedia division CEO John Stankey was quoted saying the following in a New York Times report:
“We need hours a day,” Mr. Stankey said, referring to the time viewers spend watching HBO programs. “It’s not hours a week, and it’s not hours a month. We need hours a day. You are competing with devices that sit in people’s hands that capture their attention every 15 minutes.”
Continuing the theme, he added: “I want more hours of engagement. Why are more hours of engagement important? Because you get more data and information about a customer that then allows you to do things like monetize through alternate models of advertising as well as subscriptions, which I think is very important to play in tomorrow’s world.”
With the inclusion of HBO, Turner, and Warner Bros. properties, this new service sounds a lot like what Stankey was describing—though that does not preclude the expected changes at HBO as well.
The new service would be closer in scale to Netflix, Amazon Prime Video, or the upcoming Disney streaming service than it would be to channel-specific services like HBO Now or CBS All Access. While it makes sense for individual networks to offer their content, I’m not sure how much room there is for more of these high-volume, big-tent services.
The proliferation of streaming services
Some viewers are frustrated that the proliferation of channel-based services like HBO Now and CBS All Access is ultimately going to lead to cord cutters spending as much as they once spent on cable packages to keep up with everything. Some hoped that a service like Netflix would offer virtually everything for only $10 per month.
In truth, the economics of that $10 per month idea were never even close to viable; TV series are expensive to make, and they are risky investments to boot. Many fail, so like venture capitalists who back Silicon Valley startups, studio executives have to account for the costs of several failures in addition to a few successes when budgeting new programming. Even Netflix does not produce original content in a volume to match what is available in a cable package.
And if we we were just looking at a bunch of individual channel-based services, it would still be a better deal for some cord cutters than before from traditional cable packages. Channels would be unbundled, allowing viewers to choose which programming is worth paying for, and prices would not involve a heavy subsidy for ESPN and other sports networks for viewers who are not interested in them.
However, it could ultimately make having access to all the same content cable subscribers get now more expensive. If a cable package includes 200 channels for $80 monthly and a channel charges an average of $10 per month for its OTT service, then viewers who want access to everything they got before could end up paying more like a preposterous $2,000 for the same thing. In reality, though, most channels still don’t offer dedicated streaming services outside of cable packages, and cable-like bundles would likely emerge to address the problem if they did—then we’d be right back where we started.
As for consumers who still subscribe to traditional cable and for whom these streaming services are just additive, there are are no ifs, ands, or buts about it: the monthly fees are mounting.
Projecting the outcome for consumers is further muddied by services like those coming from Disney and WarnerMedia, which could in effect be multi-network, cable-like packages in their own right, given that those companies own many networks and properties.
If this all sounds messy and uncertain, that’s because it is—for everybody. In tandem with tech companies, the TV industry is going through a seismic shift. We still don’t know what the landscape will look like after the shaking ends, and that’s at least as unsettling for consumers as it is for the companies whose futures are uncertain.