As AT&T plans to launch its streaming service in 2020, the New York Times is reporting that the potential price of the service is proving to be quite a snag as the company attempts to put the details into place for its service.
The source of the problem is HBO, which has seven million online customers. The premium cable network costs $15 a month — a price that’s practically locked in because of contracts with distributors like Comcast and Dish.
That price is higher than the amounts charged by any of AT&T’s future streaming rivals, which has frustrated executives as they try to set a competitive price, according to three people familiar with the company’s digital strategy.
Netflix’s standard plan costs $13, Hulu’s commercial-free version goes for $12, and Amazon offers video with its Prime subscription at $119 a year, or just under $10 a month. Apple has considered making its streaming product, scheduled for a fall rollout, free to Apple customers. And the Walt Disney Company will charge $7, with a discount for customers paying a year in advance.
“HBO at $15 looks unreasonable compared with Disney, which has a stronger content lineup,” said Craig Moffett, a co-founder of the research firm MoffettNathanson, referring to Disney’s ownership of Marvel, Pixar and Lucasfilm, studios that have dominated the box office.
Disney has announced that its upcoming Disney+ service will be $6.99 per month. Netflix has a standard plan for $13/mo. Hulu has plans at $12/mo or even less if you’re willing to watch commercials.
HBO, the largest component that will bolster AT&T’s upcoming service already sells for $15/mo. And lowering the price isn’t simple because they have existing contracts with cable providers. If AT&T were to move forward with attempting to cut the price cable providers charge, then that just hits the existing revenue for AT&T which is extremely important for a number of reasons. First, AT&T has an incredible amount of debt. Second, investors expect and demand the high dividend payouts that are in place. And third, AT&T’s competition – namely, Netflix – is spending billions on content.
HBO and AT&T’s upcoming service is priced higher than its competition and will likely offer less comparatively. AT&T might be willing to subsidize subscription prices for AT&T wireless customers as less churn in the mobile phone segment is worth billions, but even this demonstrates how AT&T has split priorities here as they attempt to compete against singularly-focused companies like Netflix.
Disney’s Disney+ pricing at $6.99 was not only smart strategically for itself, but it is proving to put tremendous pressure on the other current or soon-to-be entrants into the space. When Disney+ pricing was announced, it wasn’t a shot at Netflix. It was a shot at everyone else attempting to enter the space, especially companies like Apple, AT&T and NBCUniversal/Comcast.