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WarnerMedia’s 2019 service takes shape

WarnerMedia 2019 service splash

Big TV producers are marshaling their resources to launch D2C services with a shot at becoming anchor tenants in 10s of millions of American homes. WarnerMedia’s D2C attempt is beginning to take shape.

WarnerMedia to launch HBO anchored service in Q4 2019

WarnerMedia, the home of Time Warner Inc’s media assets inside of AT&T, has announced it will launch a new direct-to-consumer (D2C) video service in the fourth quarter of 2019. The company has not provided the services name or expected price-point. However, statements by WarnerMedia CEO John Stankey give some strong hints about the shape of new service.

john stankey Warner Media

John Stankey – Warner Media

“Our service will start with HBO and the genre-defining programming that viewers crave. On top of that, we will package content from Turner and Warner Bros. with their deep brand connections that touch both diverse interests and mass audiences.”

Turner and Warner Bros content

Warner Bros content will undoubtedly form an important part of the 2019 service. It could contribute valuable movie franchises such as Harry Potter and Lord of The Rings as well as DC Entertainment favorites like Wonder Woman. Warner Bros also produces television hits like The Big Bang Theory and Young Sheldon and has valuable library titles like ER. Some of these shows are entering renegotiations for syndication rights and could be available in time for the 2019 service release.

Less clear is the ability of WarnerMedia to deliver assets from The CW, its joint venture with CBS. Shows like Riverdale, Arrow, and The Flash could be very helpful in bringing younger audiences to the service. However, previous seasons are currently licensed to Netflix and may not be available by 2019 for inclusion with the new service.

Turner properties TNT and TBS have a trove of new and classic TV shows that could also pair well with HBO content. Animal Kingdom, The Last Ship, Angie Tribeca, and Wrecked all have loyal audiences that may follow the shows to the 2019 service.

Other “subscale” WarnerMedia D2C services may close

According to the Wall Street Journal, the new D2C service will be funded by “incremental efficiencies with the WarnerMedia operations,” and by redirecting resources from “subscale” D2C services it already owns.

What are the other resources? Aside from DirecTV Now, HBO Now, and WatchTV, WarnerMedia has the following D2C assets:

  • Boomerang – kids-oriented cartoon favorites
  • FilmStruck – online persona of Turner Classic Movies
  • Machinima – Video for the gamer lifestyle
  • DramaFever – Korean dramas
  • Super Deluxe – Digital studio producing edgy content

DramaFever and Super Deluxe are two “subscale” resources that don’t fit Mr. Stankey’s vision for WarnerMedia or the 2019 service. Both will be closed, perhaps contributing their liberated resources to the 2019 service.

Boomerang, FilmStruck, and Machinima seem vulnerable too. Mr. Stankey says the three services have less than half a million subscribers between them. Boomerang and Machinima don’t seem like a good fit with the premium HBO brand. With such low subscriber numbers, they could be shuttered too. On the other hand, FilmStruck’s classic movie content and approach seem like they would pair well with HBO, perhaps taking the service back to its movie roots.

[Update 10/26/18: WarnerMedia said it will close FilmStruck. It may choose to leverage many of the same assets in the 2019 service.]

Pricing is critical

With the possible addition of so many rich resources, the 2019 WarnerMedia D2C service could be very attractive to a much larger audience than HBO Now on its own. However, pricing will be critical. At $15 a month, HBO Now is already priced well above rival Netflix. The 2019 Disney service is slated to be even cheaper than Netflix, further constraining WarnerMedia’s pricing flexibility.

Given that a key goal of the 2019 service is to increase HBO’s D2C footprint dramatically, WarnerMedia will be very aggressive with the pricing of the services. Expect to see the 2019 service priced at $15 per month, the same price as HBO Now. AT&T wireless and 5G customers may see bundled pricing even lower.

Why it matters

WarnerMedia wants it’s 2019 D2C service to be an anchor tenant in 10s of millions of American homes.

It will leverage the best content from Turner and Warner Bros to help the new service grow.

Other marginal D2C services will be closed to provide additional resources for the new service.

Expect pricing to be aggressive, possibly the same as the existing HBO Now service.

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