WarnerMedia and Roku have finally reached a deal for HBO Max, bringing the subscription streaming outlet to Roku’s 46 million active accounts and filling a key distribution gap ahead of a string of Warner Bros film releases.
Along with Amazon Fire TV, Roku has emerged as a gatekeeper of streaming, benefiting from a surge in overall streaming hours even before the prolonged shutdowns of Covid-19 in 2020. Shares in Roku have rocketed 135% in 2020. They rose 4% in after-hours trading today on news of the WarnerMedia deal.
Starting Thursday, Roku users will be able to download HBO Max and subscribe to it directly on Roku. (It has been possible up to this point to “cast” HBO Max from a mobile device to a TV screen using Apple AirPlay or other means, but doing so is cumbersome and sometimes glitchy.) For users who have already subscribed to HBO through their Roku devices, the HBO app will automatically update to become HBO Max, and they will be able to log in using their existing HBO credentials.
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No financial terms were revealed in the announcement, but the sticking points had to do with the share of revenue from subscriptions and advertising. WarnerMedia’s plan to roll out a version of HBO Max with ads in 2021 meant that Roku expected to get a share of the inventory to sell, as it has with other ad-supported streaming apps.
The agreement for HBO Max, which launched May 27, comes as it prepares for the day-and-date launch of Wonder Woman 1984 and all of Warner Bros’ 2021 film releases at no extra charge for HBO Max subscribers. The Wonder Woman sequel will stream Christmas Day and also arrive in theaters. The slate in 2021 will follow that same day-and-date pattern, with all films staying on Max for one month, a remarkable upending of the traditional movie release model, though major theater circuits have not confirmed U.S. bookings as of yet.
Even after HBO Max announced a blitz of distribution deals earlier this year with pay-TV providers, gaming platforms, connected-TV devices and major hubs like Apple and Google, the two conspicuous holdouts remained Roku and Amazon. Earlier this week, Amazon said it has reached 50 million Fire TV users worldwide. (NBCUniversal’s Peacock reached terms with Roku in September but still has no Amazon deal, it is worth noting.)
John Stankey, CEO of WarnerMedia parent AT&T, in October decried the “bottlenecks” created by tech giants who wield “too much power.” Money, of course, lies at the heart of that tension, but so does data, the real currency of the streaming era. While some companies have been willing to make the tradeoff of having tech distributors deliver a high volume of subscriptions in exchange for control over viewer data, WarnerMedia has been keen to hold onto as much data as they can. As with the deal HBO Max secured with Amazon last month, which will make it available outside of Amazon Channels, the app will not be part of the Roku Channel but instead as a stand-alone app, according to a person familiar with the deal terms.
“We believe that all entertainment will be streamed and we are thrilled to partner with HBO Max to bring their incredible library of iconic entertainment brands and blockbuster slate of direct to streaming theatrical releases to the Roku households with more than 100 million people,” said Scott Rosenberg, SVP of Roku’s platform business. “Reaching mutually beneficial agreements where Roku grows together with our partners is how we deliver an exceptional user experience at an incredible value for consumers and we are excited by the opportunity to deepen our longstanding relationship with the team at WarnerMedia.”
About one-third of U.S. theaters remain closed, notably in lucrative markets like New York and LA, making theatrical prospects iffy, though Wonder Woman 1984 is projected to debut north of $60 million internationally, minus key territories like the UK, where theaters had to close again. While WarnerMedia has framed the move as offering choice to its customers, it has angered a number of stakeholders, including exhibitors, talent agencies and WarnerMedia talent and business partners. The common complaints are that it was dropped out of the blue without ample discussion and that it takes too gloomy a view of movie theaters at a time when vaccines are rolling out and many health experts see many activities potentially returning by the spring.
With deals major distribution outlets like Amazon Fire TV, Comcast, Apple TV and others already in effect, Roku had been the lone missing piece for HBO Max.
“We’re breaking new ground in the months ahead, and we can’t wait to work with our longtime partners at Roku to build on our past successes and bring HBO Max’s best-in-class quality entertainment to Roku’s large and highly engaged audience,” WarnerMedia chief revenue officer Tony Goncalves said.
HBO Max had reached 12.6 million activations by early December, Stankey said this month at an investor conference. That’s still a minority of the total HBO subscriber base, and is behind the 86.8 million for Disney+ and 26 million sign-ups for Peacock (though the latter has a free basic tier). Within AT&T’s wireless and pay-TV systems alone, roughly 10 million customers who already pay for HBO are able to sign up for HBO Max at no extra charge. New retail subscribers pay $15 a month for the service, which is at the top end of the price scale for streaming.
Convincing has been a significant challenge because of confusion over various HBO streaming options and who is eligible for Max and what benefits they get.
As the last of the billion-dollar entrants into the streaming derby, WarnerMedia launched without a marquee Mandalorian-style programming title to drive new subscriptions. While Stankey and other executives have publicly characterized the initial performance of HBO Max as solid and even slightly ahead of internal forecasts, WarnerMedia CEO Jason Kilar (a seasoned tech executive who worked at Amazon and was founding CEO of Hulu) decided it needed a bigger splash.
The timing of the announcement could also give a boost to The Flight Attendant, one of the few HBO Max originals to break through, according to the company’s own figures as well as an unofficial survey of social media chatter. The finale of the show’s debut season will be made available on Thursday.
New episodes of The Flight Attendant have been added two at a time on Thursdays. HBO Max said viewership of the sixth and seventh episodes of the 8-episode season gained 16% over the week before and was 80% higher than the show’s debut on Thanksgiving Day. The show is the most-watched on the streaming service, with the seven episodes ranking as the top seven titles of any kind last week.
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